Rain of dividends!!!

My Dearest Readers,

Oh, the delightful showers of dividends that have graced us these past few weeks! It feels like a little “financial confetti” raining down, doesn’t it? I’ve been so curious—did you happen to catch some of those lovely payouts from the various financial institutions and other organizations? I truly hope so!

Do tell me, if you did receive some dividends, how did it make you feel? That little boost to your finances can bring such a sense of satisfaction and even a bit of excitement, wouldn’t you agree? I’d genuinely love to hear about your experience.

Now, if you’re perhaps scratching your head, wondering what all this talk of “dividends” is about, or if you didn’t receive any this time around, please don’t fret for a single moment. In fact, consider this your golden opportunity, your personal invitation to embark on a journey towards greater financial understanding. This is your chance to gain the knowledge that can potentially unlock new possibilities for your financial future.

For those of you who regularly grace the pages of my column, you’ll know that I am a tireless advocate for financial literacy. It’s a topic that sits so close to my heart, and for good reason. My personal mantra, the guiding principle I always come back to, is this: “Never invest in an instrument you know nothing about.” It’s a simple yet profoundly important piece of advice that I believe can save you from unnecessary heartache and lead you towards more informed and confident financial decisions.

So, for those who are just starting their financial journey or perhaps haven’t yet delved into the world of dividends, let’s explore some fundamental aspects together. Think of this as your friendly guide.

What is a dividend?

At its core, a dividend is a portion of a company’s profits that is distributed to its shareholders. When you buy shares of a company, you essentially become a part-owner. If the company performs well and generates profits, the board of directors may decide to share a portion of those profits with the shareholders in the form of dividends.

Imagine a successful business that has had a profitable year. Instead of keeping all the profits within the company, they might choose to reward their investors—the people who believed in them enough to buy their stock. This reward comes in the form of a dividend payment for each share they own.

Dividends are typically paid out on a per-share basis. So, if a company declares a dividend of, say, N1.00 per share, and you own 100 shares, you would receive N100.00 in dividend income. The frequency of these payments can vary. Some companies pay dividends quarterly (four times a year), some semi-annually (twice a year), and others annually.

Not all companies pay dividends

It’s important to understand that not all companies pay dividends. Growth-oriented companies, for instance, might choose to reinvest their profits back into the business to fuel further expansion. These companies might not distribute dividends for many years, as their focus is on increasing their value and market share.

Furthermore, the amount of the dividend can fluctuate depending on the company’s profitability and its overall financial health. A company might increase its dividend payout if it’s doing exceptionally well, or it might decrease or even suspend dividend payments if it faces financial challenges.

The more you learn about this, the more empowered you become in making informed decisions…..let’s continue this conversation next week.

Feel free to ask me any question you may have. 

READ ALSO: Zenith Bank assures shareholders of quantum leap in future dividends