Hello,everyone in this article i will tell you about the most common term you have heard in relation to the stock market.This blog is about dividend and its impact on shareholders.

1.What is dividend ? 

Actually,dividend is section or part of companies profit which they share with their all share holders.It is not mandatory for a company or firm to share dividend among their share holders but definately a investor can select dividend giving company for his investing purposes so that he can take the advantage of better returns in the future.Some companies share their profit in the form of dividend to attract investors while some companies invest their profit in other businesses to expand their empire.

It is not a fact that company who is giving a regular dividend is a good company.Dividend alone does not describe the quality of a company.The company who is not giving dividend can give better returns in the future.

There is no taxation on dividend for shareholders but government put tax on companies when they pay dividend to their share holder.This tax is normally called DDT which means dividend distribution tax.

There is no fix criteria to pay dividend.Companies can share dividend quarterly,monthly or half yearly.It's company responsibility to take decision on this.

The major reason for paying dividend is companies don't find any alternative to invest this money.So,in order to improve the loyalty of their share holders they decide to share their profit in the form of dividend.

Paying dividend is not good for company's reserves but it increases the wealth of shareholders.So,now the question arises who should select dividend yielding companies for investing ?

If you are a old person and want regular income monthly,quaterly etc. like a pension then you should select high dividend yielding stocks but if you are young and want to increase your wealth but not from dividend because it takes so much time then you should select stocks who have high growth rate.

Obviously,companies who are not giving any type of dividend or low dividend it means they are investing their profit somewhere else to expand their business.Also,it will affect their share value in the positive manner and later their investors can take advantage of it by selling their shares on high prices.It will also attract more investors in the company.