A dividend is the part of a company's profits that are distributed to shareholders. They are usually given as cash (cash dividend), but can also be given in the forms of stock (stock dividend).
High-growth companies seldom offer dividends, because they are more concerned with reinvesting profits in the business. This is so they can maintain above average growth.
However, as companies mature they will often offer dividends to shareholders to sustain investors' interest by means other than mere capital appreciation.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Dividend payments also send out a message that the company is financially stable and on the right track as dividends are a good sign of the company's financial health.
See Tim Bennett's video tutorial: How to pick income winners: What are dividends?
-
UK growth: opportunities amid tariff turbulenceIain McCombie, joint manager of the Baillie Gifford UK Growth Trust, explains how adaptable UK companies in growth-driving sectors can prosper over the long term despite international trade restrictions.
-
These British stocks are a bargain – should you buy?From high street favourites such as Sainsbury’s and Greggs to healthcare firms, these stocks are trading at a heavy discount
