Dividend, Dividend Yield And High Yield - A Definition Of Dividend

By Dividend Yields - Stock, Capital, Investment. A dividend is a payment by the company to its shareholders. Normally, a stock pays 4 times a year a quarter dividend in order to let investors participate at the company’s success. The amount of dividends in relation to the earnings of a company is called payout ratio. This figure measures the part of the earned money which is paid to the shareholders. A value of 50 percent (half of its earnings) is a good figure. Sometimes it could be possible that companies can pay 90 percent of its net income due to its business model. Such businesses are those which don’t need much money for growing.

The dividend amount in relation to the price that an investor pays is called the dividend yield. This value measures the cash back for investors. A dividend yield of 5 percent (high yield) means that the investor receives 5 percent of his investment in cash pretax within a year. This value is estimated for the full year dividends. Most of the high yielding stocks have a high quarter dividend of more than one percent but the capital market expects that the dividend is not sustainable.

An important date for investors is the ex-dividend date. This is the day on which the new investor doesn’t receive any dividend payments. He must wait 3 months for the next quarter dividend.

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