Paying dividends to share holders

Sudarshen · 1 Paying dividends to share holders Thu Nov 03, 2011 2:40 pm

Sudarshen

Manager - Equity Analytics

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Why only a set of companies paying dividends to their share holders and some never pays. Is this totally decided by Directors ?
Who pays best dividend rates ?

nkalansu · 2 Re: Paying dividends to share holders Thu Nov 03, 2011 3:22 pm

nkalansu

Senior Manager - Equity Analytics

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Age : 46

When it comes to investing you will find following.

1. Growth stocks
2. Income stocks

Growth stocks will give you capital gains. Income stocks will give you regular income.

Growth companies will pay very little dividends or no dividends at all. They concentrate on investing profits generated by the business to generate more profits and there by increase the value of the firm and shareholder wealth. So share price tend to appreciate and there by giving capital gains to investors.

Income stocks will give you regular income. Most of the profits of the business is distributed as dividends. It is the policy of the company or they think that there are no profitable projects to invest and they think it is best to distribute profits back to investors. Most Companies who give dividends are in the business sectors where they provide essential services and goods. Gas, Food, Electricity, super markets ...etc etc. In order to pay dividend they need to have good cash flow. So these businesses (essential goods and services) generate regular cash flow so it is possible to pay dividends regularly.

Check NESTLE (NEST), CALTEX (LLUB), JINS also good.

You can find the best dividend rate by DIVIDEND YIELD

Dividend per year
= --------------------
Share price