Part 13: Dividends

In our ongoing exploration of the financial world, we often talk about growing your wealth through investments. But what does that “growth” actually look like? Today, we’ll delve into one of the most tangible ways your investments can reward you: dividends.

Dividends: Harvesting the Rewards

Remember our garden analogy from the previous posts? If securities are the seeds you plant, dividends are the delicious fruits they bear. A dividend is a portion of a company’s profits that is paid out to its shareholders. They represent your return on investment for providing capital (money).

How Dividends Work

When a company generates a profit, it has a few options: reinvest the earnings back into the business, hold onto the cash, or distribute a portion of it to shareholders as dividends. Companies that choose to pay dividends typically do so on a regular basis, such as quarterly or annually.

Types of Dividends

• Cash (Money) Dividends: The most common type, the money is paid to shareholders.
• Stock Dividends: Instead of cash, shareholders receive additional shares of the company’s stock.
• Special Dividends: One-time payments issued outside of the regular dividend schedule, often due to exceptional profits or events.

Why Dividends Matter

• Income Generation: Dividends provide a stream of income for investors, which can be particularly attractive for those seeking passive income or those in retirement.
• Investment Growth: Dividend payments can be reinvested to purchase more shares, accelerating the growth of your investment over time. Thanks to compounding, you can accelerate your returns and build wealth over time. Learn more about the compound interest in our dedicated blog post. 

Finding Dividend-Paying Stocks

Not all companies pay dividends. When researching potential investments, look for companies with a history of dividend payments. Resources like Apricot Capital app, financial news websites, brokerage platforms, and company investor relations pages often provide information about dividend history and payout schedules.

While dividends can be a valuable component of an investment strategy, it’s important to remember that they are not guaranteed. Companies can reduce or eliminate dividend payments if they face financial difficulties. Always conduct thorough research and consider your investment goals and risk tolerance before making any investment decisions.

Apricot Capital is regulated by the Central Bank of Armenia.

The examples in this text are for illustrative purposes only. This does not constitute investment advice or a recommendation to buy or sell any specific investment instrument. The past performance mentioned in this text is not indicative of future results.