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Investing for dividends

Dividend investing

Dividend is a part of the profit earned by the company, paid to the holders of its stock. If we have a stock of a listed company that pays dividends, we have to make a decision.

Is it worth holding stocks until the dividend payment date, or can it sell them and invest in other assets?

Dividend for good times

A good economic situation is conducive to the earning of profits by listed companies and, consequently, the payment of dividends. It is paid only for the year in which the company made a profit. Achieving even significant profits is not, however, equivalent to a dividend payment.

The shareholders' meeting of the company decides on everything. It pays the dividend or renounces it to leave all profits in the company. They may be used for investments or as a reserve in case of a downturn in the industry in which the company operates.

The policy of regular dividend payments has a positive impact on the company's image among investors, as it is a proof of its good financial condition, which allows it to share the profit with its shareholders.

How many and when do companies pay dividends?

There is no rule as to the amount and timing of its payment. It is received by shareholders who hold stocks on the day of its payment. The amount of the dividend for the investor is a certain value per stock, e. g. 1 USD for each stock held. This depends on the percentage of profit allocated to the dividend payment.

Each company decides on the payout date itself, although there is a so-called "payout date". Dividend season - the period in which most companies announce their plans.

Is it worth buying shares only for dividend purposes?

Rather not, because dividend is a one-off payment and should not be the main factor in the choice of stocks . It should be remembered that the dividend is paid for the previous year and the stock price responds to the current situation in the company.

It may turn out that the year for which it is paid was a good one, but the market situation has deteriorated and profits are now falling, and with them the stock price. In practice, this may mean a loss for the investor if he holds stocks mainly pending dividend payment.

The most sensible solution seems to be holding stock due to the company's good prospects and the expected stable growth of the stock price.

Receiving a dividend is an additional income for the investor. Admittedly taxed, but always.


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