Stock Dividends... |
If you buy a stock and watch its price rise, it’s exciting, but your profit is only realized when you actually sell it. *However, your stock portfolio can earn income before you sell your shares. Remember, a shareholder is an owner of a corporation. As owners, shareholders are entitled to their portions of the corporation’s profit. Profit split among shareholders is called a dividend. Money received from dividends is dividend income. Dividends are usually paid annually or quarterly. The board of directors of the corporation sets the dividend for one share of stock. For major public corporations this can be found under a column headed “Div” in newspaper or online stock tables. Your total dividend depends on the number of shares you own. Some corporations do not pay a dividend because the profit is being used to improve or grow the corporation. Some corporations do not pay a dividend because they have no profit. They are operating at a loss. Stocks that pay dividends are called income stocks, because they provide their owners with income.
Some people buy income stocks which pay dividends for the additional income. The yield of a stock is the percentage value of the dividend, compared to the current price per share.
Investors use the yield to compare their dividend income to the interest they could have made if they put the money in the bank instead of buying the stock. Other investors are not concerned with dividend income. Instead, they want to buy low and sell high. Stocks that are bought for this reason are called growth stocks. A stock can be both an income and a growth stock. Stocks are also classified as preferred stock or common stock. Preferred stockholders receive their dividends before common stockholders do, and they usually receive a set dividend which does not frequently change. Common stockholders receive dividends only when the board of directors elects to issue these dividends. Additionally, if a company goes out of business, preferred stockholders are entitled to assets and earnings of the company, ahead of common stockholders.
Dividend payments are mailed to shareholders or electronically transferred to their accounts. Dividend payments can range in value from a few cents to thousands of dollars, because they depend on how much the dividend is and how many shares are owned. Remember that dividends are not guaranteed and can be cut or eliminated if the company decides they need the money. Although, most companies do not like to cut dividends and disappoint shareholders.
Some people buy income stocks which pay dividends for the additional income. The yield of a stock is the percentage value of the dividend, compared to the current price per share.
Investors use the yield to compare their dividend income to the interest they could have made if they put the money in the bank instead of buying the stock. Other investors are not concerned with dividend income. Instead, they want to buy low and sell high. Stocks that are bought for this reason are called growth stocks. A stock can be both an income and a growth stock. Stocks are also classified as preferred stock or common stock. Preferred stockholders receive their dividends before common stockholders do, and they usually receive a set dividend which does not frequently change. Common stockholders receive dividends only when the board of directors elects to issue these dividends. Additionally, if a company goes out of business, preferred stockholders are entitled to assets and earnings of the company, ahead of common stockholders.
Dividend payments are mailed to shareholders or electronically transferred to their accounts. Dividend payments can range in value from a few cents to thousands of dollars, because they depend on how much the dividend is and how many shares are owned. Remember that dividends are not guaranteed and can be cut or eliminated if the company decides they need the money. Although, most companies do not like to cut dividends and disappoint shareholders.