Dividend Investing Basics – What Are Dividends?

Stock is the whole shares in which ownership of a company is divided into. In American English, however, the stocks are collectively referred to as “equities”. A single share of equity represents fractional ownership in percentage terms of a company’s total capital stock. Usually, when we refer to stock in this context, we mean the actual stocks in the company – not the paid-in securities or the certificates representing such securities.

The companies’ stocks may be purchased by the public either through a broker or directly. They are also sold on the stock market by the companies themselves. Many companies issue their own stock in the open market. Ordinary book-running shares and preferred stocks are two types of stocks. Other common types are common stock, debentures, treasury bills, original issue securities, warrants, bank notes, and bank stocks.

Investing in the stocks means you are buying shares that have already been issued by the company. Stocks represent individual assets or the potential value of a company’s future earnings. For this reason, buying stocks means you are buying part of a potential asset. This means you have a stake in the future earnings of that asset; in effect, you are investing in the earning potential of that company’s future sales.

A company’s stocks are its assets because they are worth something independent of what the company earns in return. However, it is only one part of an asset base. The total value of assets is determined by adding current assets, identifiable liabilities, and net worth, which is net worth less assets. Assets can be liquidated or can be held as long as they are not impaired. However, they cannot be borrowed against or transferred to others. Their sale provides the owner with a profit, and the sale of assets reduces the owner’s losses and increases his ability to earn profits.

In the United States, companies regularly pay dividends. They do so to both their shareholders and their creditors. A dividend is a payment made to the shareholder from the earnings or sale of stocks. Dividends are included in the income statement of a company’s shareholders and are reported under the statement of earnings in the year in which they are paid. If there are no dividends paid, then the company does not receive capital gains either during the year in which they are paid or in the following year. All dividends must be reported on the company’s annual return to indicate the gain or loss in its income.

One of the ways that companies increase their profits is by paying dividends. The dividends are used to increase the available earnings of a company, allowing it to make larger investments or buy more stocks. A company also uses dividends to attract more investors, allowing it to expand its earnings base and raise the amount of dividends it pays. As a result, when the price of a stock goes up, so too do the dividends.