When you invest in the stock market and become part of your chosen company’s continuing growth, you will earn mainly in two ways: through capital or price appreciation and through dividends.
Capital or price appreciation is an increase in the market price of your stock over time brought about by an increase in its potential value and the demand to buy its shares. The faster a company can grow, the faster its price can appreciate.
Profitable corporations can also issue dividends, whether in cash (cash dividend) or in additional shares of stock (stock/rights dividend) as a means for shareholders to share in their distributed profits.
Dividends are given by top companies whenever they earn significant profits from their business in a particular period. The owners of these companies can decide whether to keep all their earnings and re-invest it in their business (retained earnings), or give a portion of the earnings to its shareholder members in the form of dividends.
Again, if you buy shares of a certain company, then you are a shareholder. And you are entitled to receive dividends if the company you are invested in declares that they will distribute so on a particular date directly credited to your portfolio. Continue reading Dividends: Your Other Blessing in the Stock Market