A dividend is a proportion of a company’s earnings paid to its shareholders. The amount is decided by the company’s board of directors according to the profits incurred. Dividends are rewards a company gives to its shareholder for investing in their company.
However, it is not a prerequisite to pay dividends and companies can decide to keep the net profits inside the company. Companies that are well-established and predict steady profits offer consistent dividends, while growing companies may not or offer inconsistent dividends.
Dividends are usually paid on a monthly, quarterly, or annually basis. Companies benefit from dividends as they gain customer trust in the long run. Sometimes when companies don’t have any future projects, they invest their retained profits in paying out dividends.