Get to know about the different types of dividends
When you become a trader there are multiple ways to make money. This makes trading a lucrative option even for those with small capital for investment. Technology has made automation of trading possible with the help of tools like QProfit System. In trading besides the profits you make from the price difference while buying and selling the assets there are dividends earned as well. In stock trading, dividends are those payments that are given by the company to the stockholders. Here are the most popular types of dividends.
This is the form of dividend where the company shares its profits with the shareholders in the form of cash payments. As there is cash payment done the receiver would also have to pay the taxes on this income. One tricky aspect here is that there is an economical value sharing done here and shareholders might end up earning profits through cash dividends but might have to bear with a price drop in the share price.
As the name indicates this is the way of sharing profits by adding a few extra stocks in each shareholder’s account. A smaller portion of share distribution is called a stock dividend issue while larger volume distributions are called stock splits. In the case of stock dividend distribution to the price of the stock goes down so as to tally the total value of dividends distributed. When a cash dividend is given it would result in the immediate profits for the shareholders. With stock dividends, on the other hand, the shareholders would benefit once the price of the stock starts growing. After a stock dividend distribution as they would own a higher number of stocks than they had actually purchased they would be able to expect higher returns. It is a matter of instant profits vs. long-term larger value profits that set apart cash dividends and stock dividends.
This is the other type of dividend which is not too common. In this case, there would be physical assets distributed or even the stocks from an associated company rather than the actual company. This is a tactic followed by companies to reward the shareholders without causing any ripple in the current market value of the company’s stock and without increasing the outstanding stock volume. This is another type of dividend that can be profitable to the investor when retained for a long term.