How often do shares pay a dividend?

How often do shares pay a dividend?

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Your parents bought the shares for you when you were born and you have held them ever since. It's a good company and has made money every year.

Every quarter (four times a year) the company sends you a check. At first it was 5 cents per cheque. Then it went up to 10 cents and then to 15 cents, and now that you are 25 years old and on your own, you are making a whopping 20 cents every quarter on the one share you own.

So what are dividends and how often do stocks pay dividends?

What is a dividend?

A dividend is a payment made by a company to the shareholders of the company's shares. Dividends are usually paid quarterly, like a bonus to the holders.

Dividends are a way for shareholders to participate and share in the growth of the company beyond the increase in the value of the share price. The more shares you own, the larger your future dividends will be, and the more dividends you reinvest, the more shares you own.

Why companies pay dividends

Companies pay dividends for a number of reasons, including.

  •     Paying shareholders

Dividend payouts are a great way for shareholders to get a return on their investment, even if the share price falls,

  •     Making the stock more attractive

Stocks that pay dividends tend to be more attractive than stocks that don't, and even in an economic downturn, the stock price doesn't crash as much because there is still strong demand.

  •     Show stability

Continuous dividend payouts are a sign of a company's stability, performance and future prospects.

  •     Distributing surplus cash

When a company has matured to the point where it has minimal room to reinvest capital, it may decide to pay out cash as dividends by holding huge cash reserves.

However, some companies may not be generating cash or making profits, so they simply cannot afford to pay dividends. Others may feel they can make better use of cash, for example by investing in organic growth opportunities, buying back their own shares, making acquisitions or repaying debt.

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Keep an eye on important dividend data

When trading dividend stocks, there are three important dates that traders need to keep in mind. These include:

  •     Ex-dividend date

The ex-dividend date refers to the first trading day a stock trades with Exness swap free without its dividend. Traders who buy shares before the ex-dividend date are entitled to the dividend. In contrast, those who buy shares on or after the ex-dividend date are not entitled to a dividend.

  •     Record date

This is the date that determines who does and does not receive the dividend. Your purchase must be settled on or before the record date for you to receive the dividend. Normally, the record date for dividend shares falls two business days after the ex-dividend date.

  •     Payment date

From the company's perspective, the payment date is the date on which the dividend is actually paid to shareholders. This date does not affect who receives a dividend. In short, you will still receive your dividend payment on this date if you were a registered shareholder on the registration date, whether or not you sell the shares before the payment date.

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