SHARETIPSINFO >>Articles Directory >>Looking For A Long Term Investment? Select Some Good Dividend Stocks

Dividend is the return that a company gives to its shareholders. When a company earns profit, it can either retain that profit for investment or can distribute the profit amongst its shareholders. In fact, most of the companies retains some part of the profit for further investment and distribute the rest of the amount as dividend to its share holders. Stocks that give time to time dividends to the investors are generally called dividend stocks. In reality public companies that earn profit on a steady manner regularly pay dividends to its share holders on a fixed schedule.

Dividend can be given in many forms like cash, property and stocks. In most cases cash dividends are paid to the shareholders through check or the dividend is directly deposited to the trading account of the share holder. The next most used form of paying dividends is the stock. Companies issue number of stocks to the share holders equivalent to the amount of declared dividend. Property is the least used form of paying dividend and this form of dividend is only paid to subsidiaries of the company or to one company to the other within a corporation.

Dividend stocks are preferred by most of the individual stock market investors, who invest in the stock market for long term. The dividend paid by the company from time to time acts like a regular source of income for them while they are holding the stocks. In fact while selecting the stocks for long term investment, dividend is an important criterion that is weighed by the investors.

But while buying the dividend stocks one must remember that paying the dividend is not the liability or compulsion of the company. The management of the company can always decide to reinvest the entire profit without paying any dividends to the share holders. So, it can never be guaranteed that a company that has paid dividends earlier will pay dividend in future as well. Actually dividends are paid by the companies to retain the long term investors and it completely depends on the management and the board of directors whether they will declare the dividends or not. Another drawback about dividend is that in case of dividend there is double taxation. The company pays income tax for earning the profit and the share holder also pays tax for getting the dividend.




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