• Corporate actions and effect on stock prices

Dividends - portions of profits made by the company

• Home -> Corporate actions and effect on stock prices -> Understanding the Stock Markets
• Apr 06 2024

Dividends:

Dividends are parts of a company's earnings that are given to the shareholders of the company.Every share of stock gets a dividend.

Dividends don't have to be paid every year. The company can decide not to pay dividends to owners if they think it would be better to use the money to start a new project that will help the company in the long run.Companies that are still young but growing quickly usually don't pay bonuses. Instead, they put the money they make back into the business to help it grow even more. But when the company's chances of growth slow down and it has extra cash on hand, it makes sense to give dividends to its owners. Putting cash into the hands of owners makes more sense than keeping it on the books of the company. Giving out dividends may also be the best thing for the company to do in the future.

The earnings don't have to be the only source of money for the dividends. What if the company lost money this year but still has a lot of cash on hand? It can still use that cash to pay bonuses.At the Annual General Meeting (AGM), the board members of the company decide if they will pay a bonus.

Most of the time, when a stock goes ex-dividend, its price drops by the amount of dividends given.

The company gives out a special payout every once in a while. A special payout is one-time and doesn't happen again. When there are special dividends, which are generally much bigger payments than regular dividends, the price of the stock drops a lot. As a member, you shouldn't think of the drop in stock price as a bad thing because you will get paid in cash.

Last but not least, dividends can be given at any time during the fiscal year. It's called an interim payout if it's paid during the financial year. The last dividend is the one that is given at the end of the fiscal year.