Learn the basics of this passive income stream and why to make it part of your portfolio.
The simplest explanation for dividends is that they are payments made by a company to its shareholders. Their price and frequency depend on a lot of different factors.
What exactly are Dividends? Dividends are rewards issued by companies to their investors as an incentive to invest their shares. They can either be a monetary value or additional stocks from the company. Their value is determined by the board of directors and it is based on the company net profit. It is important to note that if directors decide to distribute shares instead of a direct monetary value, the distributed share cannot be bought. They are issued directly to the shareholders. They can also not exceed 25% of the total existing market shares, as this would be considered a stock split.
When and how much can you expect to receive? The board of directors decide the timeframe in which dividends will be distributed in advance. Such information can be found in each company's dividend schedule. There are a couple of ways this can happen. A quarterly distribution is the most common, however, you may also receive the full dividend value at once.
The value itself depends on how well a company is doing. The company directors will take a portion of the net profit and distribute it amongst shareholders. Each shareholder will receive a dividend for each share they have in the company.
For example $10,000 are dedicated to be distributed to shareholders as dividends and there are currently 10,000 shares available in the market. In this case you can expect to receive $1 per share owned. So if you have 10 shares, you will receive a dividend of $10.
How to choose the best dividend stock?
Dividend stocks are a great option to make passive income. The most sought after stocks are the ones that pay the highest dividends. Generally more established companies pay better dividends than new ones and their stocks' price is subject to less volatility. Since the dividends are based on a company's net profit, the bigger it is, a higher dividend can be expected.
Choosing the best perforing dividend stock is not easy task. Because of this we have included all the required information in our app. You will have access to all of the important company data of whichever stock you select. You can see their revenue, profits, news, everything. Based on this you will be able to see if a company is actually making decent profits or it is barely surviving. If you see a company, which has been profitable throughout the years and is issuing dividends, it will most likely pay out higher ones that a company, which isn't doing so well.
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