What are Shares and Dividend?

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Feb 20, 2023

Shares and dividends are closely related concepts in the world of investing. A dividend is a payment made by a company to its shareholders, usually in the form of cash or additional shares of stock. Dividends are a portion of a company’s profits that are distributed to shareholders on a regular basis, usually quarterly or annually. The amount of the dividend is typically determined by the company’s board of directors and is based on the company’s financial performance and future earnings prospects

When you purchase shares of a company, you become a part-owner of that company and are entitled to receive a portion of the company’s profits in the form of dividends. The amount of the dividend you receive will depend on the number of shares you own and the company’s dividend policy. Some companies may choose to pay a steady stream of dividends, while others may choose to reinvest earnings into the company instead of paying dividends. Companies that pay dividends are typically mature, stable businesses that generate a consistent level of profits. The amount of dividends paid per share is typically based on the company’s earnings and the number of shares outstanding.

When considering whether to invest in a company, it can be useful to consider both the company’s overall financial health and its dividend policy. Some investors may prioritize a high dividend yield, while others may prioritize growth potential or stability. The choice between investing in a high-dividend stock or a growth stock will depend on your personal investment goals and risk tolerance.