What is Dividend?

Dividend is a portion of a company’s earnings or profits that is distributed to its shareholders. When a company earns profit, it can either choose to reinvest that profit into the business or distribute a portion of it to shareholders in the form of dividends. They are typically paid out regularly, such as quarterly or annually. However, some companies may pay them irregularly or not at all. Dividends are often seen as a sign of financial health and stability, as they indicate that the company is profitable enough to share its earnings with shareholders.

Dividends can be distributed in various forms:

• Cash Dividends: It is the most common form of dividend. In this shareholders receive a cash payment for each share they own.
• Stock Dividends: Sometimes, instead of cash, companies may distribute additional shares to existing shareholders. This is known as a Stock Dividend or Bonus Shares.
• Property Dividends: In rare cases, companies may distribute assets or property instead of cash or stock. This is known as Property Dividend.

Dividends are usually declared by a company’s board of directors and approved by its shareholders. However, the amount and frequency of dividends can vary widely among companies and are influenced by factors such as the company’s financial performance, its growth prospects, and its dividend policy.

Dividends and Capital Gains are two ways in which investors can earn returns on their investments, particularly in stocks and other securities. However, they represent different sources of income and are derived from different aspects of investment performance. Dividends are distributions of a company’s profits to its shareholders. Capital Gains, on the other hand, are the profits realized from the sale of investments such as stocks, bonds, or real estate.