Many beginners hear about company earnings distribution but dont always fully know what they are. In simple terms, dividends are profits that companies share with their investors. When a company like Coca-Cola, Johnson & Johnson, or Microsoft makes a profit, part of that profit can be kept inside the company, while another part may be shared among investors.
Dividends are often sent every three months, though some companies pay semi-annually. For example, AT&T, Procter & Gamble, PepsiCo are known for steady payouts.
Why do dividends matter? They offer passive income. Imagine owning shares of Coca-Cola: every quarter, you collect money simply for pfizer price holding the stock. Over time, reinvesting those dividends creates wealth acceleration.
Not all companies pay dividends. Growth firms like Tesla, Amazon, Alphabet usually prioritize innovation instead. Dividend stocks are more common in traditional companies, like utilities, consumer staples, financial services.
There are also special dividends when a company has extraordinary results. For example, Microsoft or Costco sometimes surprise investors with large extra dividends.
Investors should consider the sustainability of dividends. A high yield may look attractive, but if the company is struggling, it might be a red flag. On the other hand, companies called consistent payout leaders have increased dividends for decades, including Coca-Cola, Johnson & Johnson, McDonalds.
The benefit of dividends is that they reduce risk even when stock prices decline. Retirees often prefer dividend-paying stocks because they create financial security without selling shares.
In conclusion, dividends are an important tool for many investors. By focusing on stable companies, reinvesting earnings, and choosing wisely, one can balance risk and reward.
