Things Every Investor Should Know About Dividends

The term "dividend" is used largely in the stock market world. It can get confusing for beginners to know what exactly dividends are and why they are an important factor to consider before buying shares of a particular company. If you are also one of those beginners, then do not panic.

In this blog, we will clear up any confusion you may have about dividends. Once you get the basic idea about dividends, you can start studying a stock market expert course to begin your investing journey.

What is a Dividend?

A dividend is a reward that publicly listed companies give their investors on an annual or quarterly basis. These are usually the company's net profits or earnings after taxes. The rewards can be cash-based or more stock of the company. Dividends represent a company's profitability and financial stability. The board of directors of a company decides whether to pay dividends and how much to pay. The approval of shareholders is also taken after that.

Types of Dividends

Depending on the payment timeline, there are mainly four types of dividends:

Special Dividend

When a company has excess profits or has an unusually profitable period, it rewards its shareholders with a special dividend. This happens typically outside its regular dividend schedule.

Interim Dividend

Interim dividends are given based on projected profits, quarterly or semi-annually. They are paid before the final dividend, which is paid after year-end results.

Final Dividend

Final dividend is declared at the end of the year after the company's annual results are audited and approved. It is often larger than interim dividends as it is based on the company's actual annual performance.

Preferred Dividend

A preferred dividend is paid to preferred shareholders before any dividends are paid to common shareholders. They carry a guaranteed dividend rate. If a company is unable to pay it, the amount accumulates and is then paid together.

Conclusion

As you can see, dividends are one of the key factors that one should look into before investing in a company. They provide you with steady and guaranteed rewards for investing in the company. If you do not know which companies offer dividends or what other factors to consider when investing in a company through the stock market, then you can enroll in any of the courses for investment in stock market that are available online. Make sure to have thorough information about a company before you buy shares of it