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Dividend investment has two aspects. We will discuss both company’s view and shareholder’s view on dividend investing. When we talk about dividend however we should know few basic things about dividends and investing opportunities. Dividends are one way of earnings on investment. When we think about investing in some kind of finance market we have in mind that just stocks are option. There are many options available when going for investing projects. Many people tend to have bankers doing their investing on a person’s behalf. It is in some ways safe to do investing through some institution because they diversify your investment for more returns. Dividends are one of return you get from investing in stocks.
There are two kinds of stocks, common stock and preferred stock mainly. There are further differentiation in common and preferred but the difference is not concerned to dividends that can be earned on it. Both common and preferred stock give out dividends. If you are thinking why company pays out dividends when they have borrowed money in form of stocks then the theme behind is profit sharing. If the company makes profit then the stockholders get their share of investment by having dividends. Dividend investing is the simplest and easiest way of earning return on any investment.
Company’s view for dividends payout:
When we see this dividend concept from company’s side we see how well company thinks for its survival. Companies do their financing through two means, equity and loans. Raising stocks for people to buy is company’s way of financing their firm with equity. They make you part of company by giving you stocks of company and in return use money for financing activities and operations of firm. In future company pays out dividends as a return on investment to shareholders if the company makes profit. Cash dividends are best incentive shareholders get else then voting rights in company.
Shareholder’s view for Dividends received:
Dividend investing is a strategy used by many investors. Often with one of two real purposes is to provide current income by investing in companies that pay a regular cash dividend to share holders. Other reason is to diversify their stock portfolio’s performance by attempting to achieve gains through both capital appreciation and cash income. For investors looking to add income to their portfolios, the decision usually comes down to trying to achieve this investment goal by purchasing bonds or dividend paying stocks. While bonds are considered a safer investment on the surface, due to their promise to return the principal invested in them when the bond matures, dividend investing in the right companies may be a better choice.
Why choose dividends investing instead of other investing options?
Dividends investing seem easy and one can choose risk according to their choice. Shares can always be of different kinds with different levels of risk and return involved. Taking shares that set your portfolio and risk taking ventures is totally your choice. Plus dividends have surety of payment in many cases. In comparison to mutual funds dividends are easy to invest option.