There is no doubt that dividend stocks are a kind of tag of every income investor’ portfolio. It does not matter what the financial circumstances or age of the investor is; dividend stocks can still play a major part in the portfolio. So, when it comes to you, you will own more shares if you reinvest more dividends. Also, your future dividends will also be more. If you do not have much knowledge about the dividend and want to know about it from starting, then you have landed at the right place. Here in the post you will get to know everything about the dividend. Read on.
What is a dividend?
In simple words, it is a kind of payment that is made by a company to its shareholders. Sometimes the company distributes stock dividends, but usually, the payouts are made in cash dividends, i.e., cash. It is often paid quarterly, and you can take it as a bonus. Well, most dividends are cash dividends in the U.S. It is vital to have complete knowledge about dividend in you are a neophyte in this sector. In order get an ultimate guide and latest news about the dividend, you can explore Dividendmantra.Com.
Why invest in dividend stocks?
It is true that dividends are not guaranteed, but still, people invest in them. In fact, several people depend on them and take it as a source of income. The reason being, companies pay their dividends at different times. The smart approach is to put dividends in the portfolio be reinvesting them, and you can do this if you are a young investor. Well, when it comes to retirees, they can set up a schedule to get a dividend check every month of the year.
Why companies pay dividends?
So, the question that pops up is why companies pay dividends? They pay it when the money is left after covering business reinvestment and all the operating expenses. Dividends are a kind of financial health and companies offer them in order to grab the attention of investors. It’s been seen that the companies that require less capital investment and are mature pay a dividend. In fact, such mature companies will pay a high dividend in order to share their profits with their shareholders.
Why companies do not pay dividends?
There are companies that do not pay dividends because they are young companies. Also, such growing companies usually have to reinvest its capital to enhance its growth. So, they can’t afford or can say, unable to pay a dividend. Now the major thing that comes into play is, if your company is not paying dividends and it reinvests its capital then you will get benefitted from the rising stock price. This is certainly a great thing.
So, now you have enough knowledge about dividends. Well, do not forget that dividend stocks are subject to company specific as well as market risks and they are not bonds. Also, they face interest rate risk, and when this rate rises, then several investors often take off dividend stocks for the income of bonds that are guaranteed and prompting the prices of dividend stock to fall.