SHARETIPSINFO >> Articles Directory >Making money with dividends an extra source of income
Dividends are benefits that are paid by the companies to it existing share holders whenever the company makes profit. In most cases the dividends are paid in cash to the share holders depending on the number of shares they hold. But there are also some companies that offer stocks and other assets in dividends. Dividends are paid by companies at the end of quarters and financial years. The rate of dividends and other details are decided by the management and board of directors of the company. Generally dividends are paid by large companies that are in the business for significant period of time and make regular profit. Dividends are paid by the companies to the share holders to increase their reputation and attract investors in the market to invest in the company.
As an investor dividends can really be a great way to earn from your investment. This is simply because with dividends you are getting regular returns while your asset remains as is it and in fact growing in terms of value as the stock gets appreciated over the period of time. So if you are looking to get a regular income from your stock market investment without affecting your assets it is always wise to invest in the dividend stocks. Dividend stocks are stocks of those companies that are making sustained profit and offering dividends at regular intervals to its share holders. To choose the dividend stocks in the market you have to first look for the large enterprises and companies with huge market capital as these are the companies that generally offer dividends to stock holders. Then you have to consider the financial position of the company like the earnings, debts, market capitalization, number of outstanding shares in the market and the assets of the company. These factors will give you comprehensive idea of the future potential of the company and prospects of the company for making profit in the future as this is the key for earning dividends. You should also check with the history of the company to see if they have offered dividends at regular intervals to its investors in the recent years. Once you have considered all these facts you can invest in the company and expect to earn dividend from your investment.
Other than cash dividends that are offered by the companies to its share holders there are some companies that also offer stocks instead of cash. The Dividend Re investment Plans that are offered by certain companies to its existing share holders is profitable from the investors point of view. By taking the benefit of the DRIP you can gain in many ways. Firstly, the stocks offered through DRIP schemes come with a discount of 3% to 4%. That means you are getting the stocks at a lower price in comparison to the present market value of the stocks. Apart from that you need not pay for the brokerage and other taxes that are required if you had bought the stocks from the market. So you are getting the stocks at much lower price. Now you can hold these stocks if you want to increase your investment in the company or you can also sell these stocks to get some cash. You can also hold the stocks for a few days and sell them when the stocks get appreciated as it is often seen that the price of the stocks rise right after the company has announced for dividends.
All said and done, you must always remember that dividend is the discretion of the company and there is no rule that the company is liable to give dividend to its share holders. It is decided by the board of directors to give dividends and they can always decide to reinvest the entire profit without giving any dividend to the investors like most of the technology companies do. So you should always invest in good stocks and if you get the dividends it is an added advantage that you are getting from your investment.
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