What are dividends? Are they compulsory?

Hello friends and welcome to another informative podcast by Angel Broking.

Dividends are a happy word and that’s what we’re going to explore today. So what exactly are dividends? Let us illustrate with some happy examples that allow us to reminisce in the bargain. Remember when you brought home a report card featuring an A + back in school? You’d be bursting with pride and hope and your parents – also bursting with pride, probably took you out and bought you a new toy. In college, good grades meant new jeans or a new phone. Now at work, meeting your targets means a bonus, or a raise, maybe an incentive trip or at least an award or a pat on the back. All of these were rewards and dividends too are rewards. When a company performs well it rewards its shareholders for having invested in them and this reward is referred to as dividends.

For you to end up with dividends, the company should have clocked sizeable profits so as to have excess capital available after

- One: Paying off creditors and settling any debts

- Two: Paying salaries, rent and other expenses related to the daily running of a business

- Three: Putting aside money for expansion and other growth efforts

Additionally, the dividend payout needs to be

Firstly initiated by the board of directors

The amount and the payout itself need to be approved by the shareholders

You will usually receive your dividend cheque by courier.

Those were the basics but over and above there are 6 key facts that you need to know and understand with regards to dividends. These facts most definitely affect your investment game so pay careful attention.

Ready?