Question

What is a dividend?

Short answer

The dividend is a company's profit part.

Step-by-step solution

Step 1. Concept of dividend

Shareholders put their money into the stock market and receive a dividend in return. It can be paid on a monthly, quarterly, or half-yearly basis, for example.

Step 2. Explanation

Dividend is the reward paid to shareholder for investing his money in the company. Whenever company gets the profit it keeps a part of profit as retained earnings for ongoing expenses or future expenses and rest of it is divided among shareholders as dividend. Some companies announce dividend even when they do not get enough profits just to keep good track record in the market. The day dividend is announced, share prices increases. So better the dividend, better the share prices. Hence the trust of investors increases and company can grow through their money