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What Are Dividends?

Thursday 4th April 2024




What is a Dividend?

A dividend is a portion of company earnings distributed to some or all of its investors. If you own the right type of shares and the company you invested in is doing well financially, you might end up receiving these payments regularly.


Why do companies pay Dividends?

Companies generally share some of their profits with investors when they have enough cash left after expenses.


This practice is fairly common, particularly among big, stable corporations. Investors have countless ways how to share their money, and a healthy dividend can make the difference in attracting their capital to support or drive up share prices. In exchange, the shareholder collects a nice loyalty bonus. Companies generally share some of their profits with investors when they have enough cash left after expenses.


This practice is fairly common, particularly among big, stable corporations. Investors have countless ways how to share their money, and a healthy dividend can make the difference in attracting their capital to support or drive up share prices. In exchange, the shareholder collects a nice loyalty bonus.


How Dividends Are Paid

Dividends are distributed either regularly (typically twice per year) or on a one-off basis. In most cases, they are declared during the course of the fiscal year (the interim dividend) and at the end (the final dividend).


Occasionally, the company may announce a special dividend too. These are one-off payments made to shareholders usually after receiving a big windfall.


When a company's board of directors agree to pay a dividend, a set sum per share will be allocated.


Important Dates:

  • Declaration Date: The day the board reveals its intention to pay a dividend.

  • Ex-Dividend Date: Investors must buy shares before this date to qualify for the upcoming dividend.

  • Record Date: This is the date the company uses to determine which shareholders are invested and entitled to the dividend.

  • Payment Date: The dividend is dispensed and appears in the investor’s account. this is around one month after the record date.

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