Learning about shares: Windfalls that flutter

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Thursday 20 May 2004

Q. Barbara asks: Can you explain what the dividend columns in the newspaper sharemarket table mean? Are there any underlying messages hidden in dividends?

By The Landlord

A. Dan Dividend responds: That's an interesting question - there's more to dividends than meets the eye. Like you, Barbara, if readers started buying shares in the summer when we began this column, they might have already received a dividend - depending on which companies they chose to invest in.

A dividend is often a nice little windfall that arrives in your mailbox or bank account. If you invest in dividend-paying companies, they're an important part of the total returns you get from your shares.

So what exactly is a dividend?

A dividend is a payment a company makes to its shareholders. It's usually paid from profits, but can also be paid for other reasons, such as when a company has extra cash over and above that needed to finance growth or expansion.

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