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At their core, dividends are payouts made by a corporation to its shareholders, essentially sharing a portion of its profits. When you purchase common stock, you acquire a stake in the company. If the company performs well, it rewards its owners—its shareholders—with dividends. These can be distributed on a monthly, quarterly, semiannual, or annual basis, depending on company policy.
Dividends provide a dual advantage: they offer immediate income while allowing you to hold onto and potentially appreciate the value of your investments without the necessity to sell.
The Basics of Dividend Investing
To successfully generate passive income through dividends, remember these key terms: