by Bessiel Mickol

Created on: July 08, 2010

First, let us start off by defining what dividends are for those who are unfamiliar with the term and interested in learning more and perhaps beginning to invest.  Dividends are the earning from corporation after-tax earnings that are distributed to its shareholders. While dividends put money in the pockets of the company’s shareholders, they are not without disadvantages.  The company pays a rate per share on a monthly, quarterly or yearly basis. Mostly companies will pay on a quarterly basis.   Disbursement of these funds can be in cash or they can be paid in the form of the company stock, which can be to your advantage and disadvantage as well. A company earns profit from operations; management can do one of two things with the profits. It can retain them and reinvest them into the company creating more profit and thus further stock appreciation and the second option is to distribute a portion of the profits to shareholders in the form of dividends.

Dividend investing can be profitable, and there are many ways to screen a company with many stock screening programs that you can pay for and some you can use for free.  Understanding the characteristics of good dividend stocks are essential, your screening process however you decide to use will help filter out unacceptable choices. Just remember, should fully understand the role of dividends and the company’s cash flow before jumping to conclusions.

The supporters of dividend payments refer of to the phrase “bird in the hand” cash. It is a philosophy that seems to work for many investors. It is the cash in hand argument with its basis being it is better to get something for holding your stock, rather than depending solely on  a rise in share price in order to earn money. The quarterly dividend put money back in the hands of its investors while they hold the stock.  Over the long term, these disbursements add up and are in addition to gains made by the future sale of share. Companies paying regular dividends often appear in lists of overall return leaders. Companies also publish their dividend announcement every quarter as well; because of the distribution of cash to share holders will holds great public relations for a paying company. 

Shareholders hold on to their shares knowing they will be receiving the dividend payment, if more investors hold the stock, the price may rise and grant more gain’s for the investor.

There is stability in these

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