| A dividend is a part of a company's profit that is paid | | | | be a good indicator of a company's continued |
| out to the shareholders, commonly in cash or stock. | | | | success. This allows you to quantify your gains easily. |
| For shareholders, dividends present a great way to | | | | Cons of Dividends |
| get periodic payouts on a high-yield investment. | | | | Despite their benefits, dividends aren't for everyone. |
| However, like all types of investments, there are | | | | Before you and your financial advisor decide on this |
| drawbacks to any plan that routinely pulls out money | | | | course of action, you'll want to consider the following: |
| rather than continues increasing revenue. | | | | Dividends are not universally available - The Board of |
| Pros of Dividends | | | | Directors is responsible for deciding whether or not a |
| Dividends certainly do have a place within the financial | | | | dividend is to be paid out to its investors. However, |
| world. They provide a way for investors to place a | | | | even if a company makes a significant profit, it is under |
| large amount of capital that can then be used as a | | | | no obligation to pay a dividend. |
| source of income, since it regularly brings in money. | | | | Tax repercussions - Dividends are often criticized as |
| When you choose dividends, you can look forward to: | | | | being subject to double-taxation, as the company is |
| Profit while retaining a stake in the company - Normally, | | | | taxed on its income and the individual shareholder is |
| a stockholder would have to sell his or her stock in | | | | also subject to paying taxes on the dividend payout. In |
| order to profit from his or her investment in a | | | | the United States, dividends are subject to a 15 |
| company. Dividends allow investors to profit from their | | | | percent dividend tax rate. This is higher than what you |
| investment in the company without selling their stock. | | | | can expect to pay on other types of investment |
| This means you can look forward to regular returns. | | | | windfalls. |
| Short-term results and long-term opportunities - An | | | | Making the Decision to Use Dividends |
| investor can continue to receive dividend payments | | | | Before you decide whether or not dividend investing is |
| from the company as long as the investor continues to | | | | right for you, talk with your financial advisor. While |
| hold stock. This can lead to significant dividend | | | | dividends can be a great way to see regular returns |
| payments for a long-term investment, even though | | | | on your investment, you might find that your unique |
| you're seeing results over a short-term time frame. | | | | needs are better served with stocks, bonds, or other |
| Visible indications of your investment's security - A | | | | financial options. |
| continued, increased dividend payout is considered to | | | | |