What Does Dividend Mean In Stock Market
Dividend Is Considered One Of The Best Thing In Stock Market Which Is Necessary For All Investors To Understand. So, Today In This Post I Would Talk About Dividends So If You Read Properly You Could Gain Extra Returns From Stocks In Form Of Dividend Yield. So To Understand Dividend Yield We Need To Know What Is Dividend And Who Gives Dividend? So, The Company Whose Stock Or Shares Are Listed In Stock Market Gives Us Dividend Yield To All The People Holding Their Shares On That Date. The Thing That People Like About Dividend Is That Company Charges No Money For Giving Dividends And Gives It Free For All Shareholders. So We Need To Understand Why Company Gives Dividend For Free To Us? Well, The Companies After Making Profits From Their Sales Of Goods Or Services They Have Two Choices. First One Is To Invest That Profit Into Their Own Company For Purpose Of Future Expansions Like Launching New Product Or Service, Acquisition Of Other Companies, Building New Factory Or Plant Or Many Other Things. Second, Option Is To Divide That Money Between The Shareholders. The First Option Is Chosen By The Companies Which Are New , Is Small Company Or Has Potential To Expand In Future So they Doesn't Give Out Dividends And The Second Option Is Chosen By The Companies Which Makes Profits In Millions Or Billions, Is Very Large Companies And Doesn't Have Much Potential To Expand In Future As They Already Are So Much Big That They Can't Expand More Now So They Choose Second Option And Give Out Very Good Dividends So That The Money Which Is Extra And From Which Company Can't Expand More Can Be Used By The Shareholders. But, After All You Should Never Run Only Behind Those Companies Who Give High Dividends As It As Some Negatives Too. Basically, All Dividends Given By Companies Are Roughly Between 1- 8 or Rarely 10% So It Is Common Sense That Should You Risk Your 100% Capital For Those Dividends. I Will Explain This Negative Point With The Help Of An Example. Suppose You Invested 100,000 Rupees In a Company Which Is Giving 5% Dividend. You Will Receive 5000 Rupees As Dividend For Free But If In Greed Of Dividends Only You Chosen Wrong Company You Can Loose More Than 50% Of Your Capital Which Is 50,000 Rupees So Now You Decide Is It Good To Invest Only In Companies Giving High Dividends. So, Dividends Are Good Until You Become Greedy For It And Loose All Your Capital. So, By Reading This Post You Would Have Understood The Positives And Negatives Of Dividends And Never Stop Learning As Without Knowledge You Can't Earn.
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