I.49. The concept of a dividend.

When working with stocks, you can earn dividends. Dividends are a payment due to you as a shareholder of the company equal to a share in the annual profit of the company. How interesting is it? Let’s deal with this issue. The decision on the payment of dividends is made by each company annually at the Board of Directors. There are periods when a decision is made not to pay dividends in the current year or to pay less than expected according to the forecast based on the profit received for the year. Some companies do not pay dividends at all, for example, Yandex or OZON. The average amount of dividends is shown in Table 1.

1. The amount of dividends paid on Moscow Exchange shares.

YearDividend, rub.Annual yield, %

Not too much. It seems to be. At first sight. However, there are a sufficient number of people who want to receive a dividend income. Why? The point here is a simple calculation. Suppose you decide to purchase shares of the Moscow Stock Exchange at a price of 100 rubles. After six months, these shares fall in price to 50 rubles. You receive dividends of 5% per annum (on average), which of course does not seem to cover the resulting loss of 50%. Let’s look at it from the other side. It is difficult to assume that the fallen shares of a dynamically developing company will be at such a low level for a long time. On the one hand. On the other hand, on average we receive 5% per annum in the form of dividends, which in the future for 10 years will cover losses from temporary falls over these years. In general, your investments in 3-5 years will give you a profit regardless of the initial price of the instrument. This is the essence of dividends. Of course, sometimes it is more appropriate to invest money in a bank and eliminate risks from stock volatility.

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