Owning shares of a company that pays dividends is a nice treat because these dividend payments are like an added value to the investment. They are a portion of the company profits distributed to shareholders according to the direction of the company board of directors. Dividend payments most frequently take the form of cash but they may also be paid as additional shares of company stock.
The term dividend frequency refers to how often the dividend is paid. Most dividend payments are made quarterly, biannually, or annually. The dates the payments are made are determined by the fiscal calendar of the company. A one-time or special dividend is not measured by frequency because it is only paid sporadically.
A company board of directors may frequently change the amount of the dividend but it will rarely change the dividend frequency. The total dividend payment is divided by the number representative of the payment frequency and the resulting partial payment is made on designated dates. For example, a $100 dividend that is paid quarterly will result in a $25 dividend payment each quarter.
Some research shows that investor perception of the value of a company increases when dividends are paid more frequently. This is based on the complex concept of mental accounting and leads the investor view future losses as less concerning. It leads to an overall perception by investors that the stock carries less risk. This may result in the investor holding the stock longer than he or she would have if it did not pay dividends.
That theory is largely speculative but it does have some foundation in proven research. The fact of the matter is that dividend payments provide a steady flow of income to investors. This is viewed in a positive light, particularly during times when the stock price is wavering.
I'll Personally Email You
Dividend investing is the only way I invest, and here's why: dividend stocks create a secure, passive income, and are less risky than non-dividend investing.
If you like what you're reading, then sign up for my free newsletter. I send killer guides on building passive incomes, getting debt free fast, and finding real financial security.
Plus, if you email me, I'll respond. Every time. And this is all free. Sign up right now:
