Investopedia Video: What Is A Dividend?

Income investors love them and growth investors rarely expect them, but just what are dividends? Learn the story behind these payouts and why they are (or aren't) offered to investors.
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I agree with you

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Cartoons are so understandable

[@anindyadebnathXVII]

Investopedia = Always the best and easiest explanations!!!

[@codesymphony]

Why would he give away part of his earnings for free other than simply being generous? How does that benefit him?

[@user-zk3bc6cc2g]

To encourage more investors to invest in his company

[@charlescurtis6321]

+Sean Xiao But wait. If the market is too saturated to expand his business any further(the reason he gave dividends anyways), why would he need/want more investors?

[@charlescurtis6321]

+Sneaker Connoisseur thank you. One more question. Do Investor's of Equity Securities get a share of the profits as well, since they own a share of the company? Or are dividends the only way of making money on that investment, other than hopes of selling the share at a higher Market Price?

[@andoisx45]

CEO's and executives are usually large shareholder and after you get your income, bonuses paying out divined to yourself and friends is the easiest way to keep your company's money in your pocket. Otherwise using company profit for anything aside from business expense touches on embezzlement. Put another 10 mill into RnD in a saturated market or split a majority of that 10 mil with the board members and let the 1000 + share holders squabble over the rest. Also in cases where the owner answers to a board and can be replaced and voted out of his company he may not have a choice.

[@TacticsTechniquesandProcedures]

Short answer:regulations

[@peyondi]

so the shareholders get divident once a year right? or not?

[@daniyalhameed5509]

A dividend is, however, sometimes paid twice a year and sometimes there is no dividend whatsoever. Ordinary shareholders do not necessarily receive a dividend each year. On the other hand, preference shareholders get a fixed return on their investment through fixed dividend rate. Hope it helped..

[@hammerandclaw]

+Daniyal Raza so would those preference investors get a fixed percentage in dividends, or a fixed sum? or does it vary?

[@daniyalhameed5509]

+hammerandclaw Dividend is normally paid as a percentage of share capital (also reffered to as paid-up equity). However, sometimes the company may pay a dividend in kind to its shareholders (i.e. by transfering an asset). Therefore, the time to pay dividend to preference shareholders is fixed and is unaffected by company's financial performance, but the amount of dividend may vary. Hope it helped.

[@daniyalhameed5509]

+hammerandclaw Please avoid typos if found in my replies. Thank you.

[@hammerandclaw]

+Daniyal Raza That makes sense - thanks very much! One last thing, so the dividend is usually a percentage of the value of the stocks that an investor holds - e.g. if I had $100 of shares and the divided was 5%, I'd get $5, if was $200 I'd get $10 etc.

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