What is dividend and Why do investors invest in dividend stocks

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Saurabh Guptahttp://karekaise.in
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You must have often heard in the stock market that some company gave 100% dividend and some gave 200% dividend, big investors earn money from dividend and become rich. Warren Buffet, the world’s richest investor, earns more than 3000 crores every year from the dividend of just one company, but What is dividend and Why do investors invest in dividend stocks after all?

  • Which companies pay dividends and why?
  • How to know which company pays when and how much dividend?

Today, in this post, I will answer all these questions of yours and I am going to give complete information about what is dividend in the stock market, from basic to advance. I promise that if you read this post completely from beginning to end, then there will be no question related to dividend in your mind.

What is dividend in share market?

Dividend means dividend is that part of a company’s profit which it distributes to its shareholders in the form of additional profit. In the stock market, only some companies give dividend which is given on the basis of per share. Investors get this dividend money on a quarterly or yearly basis.

Whereas  companies that do not pay dividends prefer to invest their remaining profits back in the growth of the company.

What is Dividend Income?

Dividend income is the money that is received by holding the shares, meaning the more shares you have in the dividend paying company, the more dividend income you will get.

What is Dividend Per Share?

The amount of dividend paid on one share of the company is called ‘Dividend per share’. It is also called DPS in short.

What is Dividend Yield?

Dividend yield means how much (%) dividend the company pays on the share price.

In other words,

Dividend Yield is a ratio which tells that the dividend paid by the company on 1 share is what percentage (%) of the company’s current market price.

thus:  Dividend Yield = dividend per share / current market price of a share

Why do investors invest in dividend stocks?

People are excited about dividend because you earn profit in two ways in the stock market.

  • Buying the first share at a low price and selling it for a high.
  • By the second dividend.

People want to invest money in dividend paying stocks because the shareholders will not only benefit from the increase in the share price every year, as well as getting a fixed amount once or twice a year will have different benefits.

Along with this, some people also think that even if the share price does not increase, even if they invest in a company with 10% dividend yield, even then they will earn more than 6% return of FD, then it will also be in dividend stocks. There is a reason to invest.

The more shares you have in your portfolio, the more dividend you get. That’s why people consider it as a way to earn regular income or passive income from the stock market.

And if seen, this is also true because you can talk about any rich man in the world, whether it is Mukesh Ambani or Gautam Adani of India, Elon Musk of Tesla, Bill Gates of Microsoft or Jeff Bezos of Amazon,

All these people are not rich because they own most of the shares of their companies, but because they are rich because they earn thousands of crores of rupees every year from their companies (which are the world’s largest companies) as dividend income.

Why is it important to understand dividends?

With just the dividend you can find out a lot about the promotors of any company like; Management’s nature, honesty, plans, how serious is he about the company and what is his future vision about the company,

To know all this, you have to see how the company gives dividend and what has been its past dividend track.

Which companies pay dividend?

Dividend always gives only those companies which are in profit, companies living in loss never give dividend. Dividends are given by companies that have become very large and mature.

Because when companies are in the era of new and expanding their business, then they want to invest all their profits in the expansion of their business because companies know that by investing today’s profits in business, they can do it. In the future, it can earn many more profits.

It is not that if the companies do not pay dividend, then the investors do not benefit, but if the company keeps increasing its business by putting the right place instead of giving dividend, then its net profit will also increase and only the investors will get the benefit from increasing profits.

Rather, it will benefit the shareholders in 2 ways. First, due to increase in the profit of the companies, the share price will also increase, which will benefit the shareholder only.

And  second, If that company gives dividend in future then it will be many times more than today’s dividend because by then (in future) the company will have become very big and its profit will also have increased manifold.


I hope you have liked my article on What is dividend and Why do investors invest in dividend stocksIt has always been my endeavor to provide complete information about the future of stock market to the readers, so that they do not have to search any other sites or internet in the context of that article.

This will also save their time and they will also get all the information in one place. If you have any doubts about this article or you want that there should be some improvement in it, then you can write comments below for this. this is only for educational purpose.