What Are Dividends? Types and Examples

If you are new to investing, you have likely come here to know what the term dividends means, what exactly a dividend is, and why investors value them, so here we will understand what are dividends.

What are Dividends?

These are payments which made by a corporation to its shareholders, typically as a portion of the company's earnings. So these distributions serve as a reward for investing in the company. They are usually paid in cash or additional shares of stock.

Types of Dividends

Here are the types:

Cash Dividends: This is one of the most common types, where paid directly to shareholders in cash. For example, cash dividend of INR 10 per share is declared, and an investor owns 500 shares, the investor receives INR 5,000.

Stock Dividends: This one is also a dividend type, which is paid in the form of additional shares rather than cash. For example, if a 20% stock dividend is declared, and an investor holds 200 shares, the investor receives 40 extra shares, which increases their total to 240.

Property Dividends:

This dividend distribution is made in the form of assets other than cash or shares, such as physical goods, real estate, or intellectual property. For example, real estate or a patent given to shareholders.

Scrip Dividends:

This dividend is issued as promissory notes or IOUs, which are promises of payment at a future date. For example, an IOU for the future cash overstock payout.

Liquidating Dividends:

This one is paid when a company is winding down operations and distributing remaining assets to shareholders. For example, 60% of assets are distributed during liquidation.

Special Dividends:

Here is a one-time payment made outside the regular dividend schedule, often when a company has exceptionally high profits or surplus cash. For example, a $0.15 per share special dividend.

Concluion

In summary, understanding about this term and the different types can help you build a stronger, more diversified investment portfolio. So, whether you are aiming for regular income or long-term growth. This can play a key role in achieving your financial goals.

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Saniya

I am a writer, and this sentence speaks louder than anything, I love to play with words because I have a passion for writing easy and good-quality content that reflects simplicity. Readers like content that is straightforward with simple language. My priority has always been to deliver content that connects with the reader.

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