Dividend investing can be a solid strategy, so it’s worth knowing how dividends work
What is a dividend?
A dividend is a payment made by a company to its shareholders. Dividends are usually paid at a specific frequency—quarterly, semi-annually, or yearly. The size and payment of a dividend is determined by a company’s board of di-rectors.
Dividends may be paid in cash, or in the form of company shares. Investors may also be offered a choice of cash or shares. Companies are not obligated to pay a dividend, and can reduce the dividend or stop paying it at any time.
A common metric used to determine the relative size of the dividend is the dividend yield. This is calculated by dividing the dividend share by the share price of the company, expressed as a percentage. For example, if a dividend of R1 is declared and a company share is trading at R25, the dividend yield is 4%.
If a shareholder (that is a trader or investor) owns shares on the ‘last day to trade’ dividend date or earlier, they are eligible to receive that specific dividend…
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