What Is A Dividend On A Stock?

What Is A Dividend On A Stock? [2021]

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What Is A Dividend on A Stock?

A stock can be defined as the type of investment that represents an ownership share in a company. On the other hand, a dividend is the distribution of a portion of the earnings of the company, decided and managed by the organization’s board of directors, and it is paid to a class of its shareholders. Therefore, a dividend on a stock is the dividend payment that is made to shareholders in the form of stock/shares instead of cash from the company’s earnings.

The dividend stock rewards the shareholders of the company without reducing the company’s liquid assets. However, it can dilute earnings per stock or share.

What is a dividend?

What Is A Dividend Growth Stock?

This is a stock that has a track record of paying its shareholders reliable and growing dividends year on year. Companies that have a good dividend growth stock in theory usually meet the following strict conditions:

  • Stable and mature businesses 
  • Less likely to reduce their dividends in the future 
  • Likely to increase its dividends each year.

What Is A Dividend-Paying Stock?

If your nerves are frayed by the volatility of the stock market, then the dividend-paying stock should be part of your investment strategy. Companies usually pay dividends to its shareholders as a way of showing their appreciation for purchasing their stock. These dividends are usually paid each quarter; nevertheless, companies also pay special dividends that are usually due to one-time events. The payment values are usually determined by a yield (this is the measure of the dividend in relation to the company’s share price).

How Dividend Investing Works?

Purchasing stocks that pay good dividends can, over time, be very lucrative as long as you pick the best-performing stocks. In case the company that you own shares has a DRIP (dividend reinvestment plan), you can choose to have the dividends reinvested to purchase more shares instead of taking out a profit. This is a good strategy, especially when you receive very small dividends either because you own very little stock or because the company is still growing.

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