Dividends are a way for investors to receive cash payments from a company as a reward for holding their stock. They are usually paid on a quarterly basis, and are more commonly found in more established and mature companies who are reinvesting back into their own research, development and growth. Dividends are one of the two ways to make money from holding a stock, the other being stock appreciation, where the stock price goes up.
Depending on your financial goals, dividends can be used as a source of income, especially for retirees who can use the cash payments to live their life. For those in the growth phase, they can also choose to reinvest the dividends back into buying more shares in the stock, which is a way of compounding the investment over time.
It's important to note that not all companies pay dividends, so it's important to check a company's history of paying dividends and their current dividend yield to see if dividends are a potential source of income for you. And for those who want to use dividends as a source of income, it's crucial to plan and diversify the portfolio to ensure a steady income.
In summary, dividends are cash payments from a company to its shareholders as a reward for holding their stock. It's important to review a company's dividend history, yield and payment schedule and consider whether dividends align with your financial goals, whether that is to generate income or for investment growth. It's an important part of investment planning, and can be an important way to generate an income from your portfolio.