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?
-
8 of the best houses for sale for around £1 millionThis week: the best houses for sale for around £1 million – from a wing of a Grade II-listed Victorian manor house in Sunderland, to a brick-and-flint cottage in Cley next the Sea, Norfolk
-
Starling Bank to scrap 3.25% interest rate from popular current account within daysStarling is to remove the generous 3.25% it pays on current accounts from next week – what does this mean for customers and should you move?
