Penny Stock Brokers 4u

Income comes in many names; to the employee it is wages, to the savings account holder it is interest, to the company it is profits, and to the shareholder it is dividends. Not all companies pay out a dividend. The Board of Directors makes the decision whether or not to pay a dividend and the amount to be paid if they decide to do so. The date that they announce this information is called the Declaration Date or Announcement Date.

But what are dividends exactly?  A dividend is the distribution of a portion of a company’s net income to stockholders. It can be paid out either as a cash dividend or a stock dividend. Generally dividends are paid in cash at a set amount per share held. A stock dividend is when a company gives out additional shares instead of cash. Although rarely executed, another form of dividend is a property dividend where the company gives out a tangible item, such as their products.

Companies are not required to pay out a dividend but a company that suddenly stops or reduces dividends can see the price of their shares drop as investors become concerned with the stability of the company. New companies may not pay a dividend as they need profits to grow the company first and pay down any start-up debt they may have incurred.

Besides the Declaration Date, other important dates regarding dividends are:

• Date of Record – the date the company views who the current shareholders are that are entitled to a dividend
• Ex-Dividend Date – the first date that the stock would not trade with a dividend as the holder before this date is entitled to the dividend
• Payable Date (Date of Payment) – the date the company sends out the dividend payments, generally a week or more after the date of record

Investors that require a regular income stream from their investments will often invest in stocks that pay dividends. They look first to those that have a consistent history to gain the most likelihood of the anticipated payout.  Additionally they will determine whether the Dividend Yield (Annual Dividend Per Share divided by Price Per Share) to ascertain that the yield meets their investment goals. Dividends can also be a portfolio growth instrument by reinvesting the dividends back into shares as they are received to enable the total dividend amount received each time to increase as more shares are owned.