A dividend represents the distribution of a portion of a company’s profits to its shareholders. Dividends are usually distributed by well-established, financially sound companies, while smaller companies are less likely to pay dividends.
There are multiple types of dividends including cash, stock, property, scrip, and liquidating dividends. Well-established companies pay dividends to their shareholders on a regular basis and they represent one of the most common ways investors can make returns from investing in a company.
On the other hand, paying dividends is not required by any law and there are some companies that do not pay dividends. Those which do, however, are known as dividend stocks.
Many investors prefer to invest in dividend stocks because they provide them with a source of a steady income and some of these companies pay dividends even when they do not make significant profits.
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