What is a dividend?
A dividend is a piece of the profits of a company. Based on performance and cash available, companies can declare dividends monthly, quarterly, bi-annually, or annually.
Dividends are the most popular form of passive income. You do not need to do anything except hold the stock.
Why do companies pay this to investors?
- Sharing profits with investors.
- Attracting new investors or even institutional investors (larger companies).
Why don’t some companies pay dividends?
- Reinvesting them back into the company, which will ultimately grow the share price. Some companies need the money to fund operations or to expand. Amazon is famous for never having paid a dividend to shareholders ever, but they give shareholders record returns. This might not be sustainable forever, but for now, it is working for them and the type of investors they have.
Shareholders cannot demand dividends. The board of the company has the sole discretion of whether they want to pay dividends or not. We as shareholders appoint the board and therefore trust them to do what is best for the company.
How do you know if a company pays dividends? The easiest way to check this is on Google. Enter the name of the company and enter “share price” after the name. The graphs below will come up. I have ticked the dividend information you need. You can see Exxaro paid 19% of the share price in 2021. This can however change going forward but is a good indication of dividend payers.
