Not every company pays dividends. Younger, fast-growing businesses often reinvest all their profits to expand, while larger, more established companies are more likely to return some profit to shareholders regularly. A dividend provides income you can spend or reinvest, and for some investors this steady stream is a key reason to hold a particular share. The dividend yield, shown elsewhere on this site, expresses the annual dividend as a percentage of the share price, so you can compare the income on offer.
Reinvesting dividends, rather than spending them, can make a large difference over time. When you use the cash to buy more shares, those shares can themselves pay dividends and grow in value, feeding the compounding effect. Over many years, reinvested dividends have historically made up a substantial part of the total return from shares.
A high dividend is not automatically a good thing. An unusually large yield can sometimes be a warning sign that the share price has fallen because the market doubts the company, and dividends can be reduced or stopped if profits come under pressure. As always, the income on offer is best considered alongside the health and prospects of the underlying business.
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The Steady dividend profile shows large companies that pay a regular dividend. It is a learning example, not a recommendation.
Show steady dividend stocksThis content is general information, not investment advice.