Dividend-paying stocks should be part of the portfolios of investors whose nerves are frayed by stock market volatility and even more adventurous types because they provide a guaranteed source of income. Corporations pay dividends to shareholders as a way of showing their appreciation for holding their stock. They are usually paid every quarter, though firms also pay special dividends that are usually because of one-time events. The value of these payments is determined by a yield, which is a measure of the dividend in relation to its share price.
Don’t be fooled into thinking companies pay shareholders just to be magnanimous. At times, companies pay high dividends as a way to attract Wall Street’s attention because investors would otherwise ignore their stock. But be careful. Corporations that give money to shareholders can also take away. Companies sometimes pay dividends that they can’t sustain.
Source: Investopedia
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