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So, today’s post will be centered on Dividends. The reason why I decided to talk about this topic is because sometime last month, MTN paid out dividends to their shareholders. A lot of us got the dividends and I started to receive lots of messages from some people about how this works, will I get paid again, is it going to be a monthly thing, is it going to increase? so that was how this topic was birthed.
WHAT ARE DIVIDENDS?
Dividends simply means an amount of money paid out from a company to their shareholders from profits made over a period of time. It could be bi-annual or a couple of months. It is just something that the board of a company decides and once they decide to pay this dividend, everyone that is a shareholder will get the dividends paid to them. This dividend is also calculated according to the amount of shares that each shareholders has. What this means is that if the company decides to pay 1 dollar per share as dividend, it means that if you have like ten shares or ten unit of shares, you’ll have 10 dollars or if you have hundred units of shares, you’ll have 100 dollars making the whole system fair.
Another thing that is worthy of note is that dividends are not compulsory and dividends are not periodic. Nobody is obligated to pay dividends from time to time or every single month or every single year. It’s just something companies do to say ‘thank you’ to everyone who bought their shares and of course by virtue of that you’ve helped them to make their profit.
ARE YOU GOING TO GET THIS EVERY YEAR?
The answer to this is ‘NO’ but this is depending on the company. I read an article where they said that MTN does this annually. So for MTN, you might receive your dividends annually but if you have shares with other companies, you may not get dividends at all, it is not something that is expected, it’s just like a surprise or a bonus and you may or may not get it. Big companies, let’s say Amazon don’t pay out dividends at all and some of them have the logic of saying “It’s just like a waste of money, it is best that we take that money and stick it in the business and then the shares and our company will do better and we will reward our shareholders by actually making the company do better and making their shares worth more”.
Another thing that I would like to point out about dividends is if your company or a company that you’re investing in is paying out dividends from time to time, that could be a pointer that the company is doing well and there are so many things and so many metrics by which you can judge a company or measure their performance and dividends can be one of them. For instance, you invest in a company and you notice that they pay you dividends quarterly or annually and all of a sudden, you notice a drop in the amount of time they pay dividends or they do not even pay dividend at all compared to before, then it could be a pointer that the company is not doing as well as they use to. Of course, there can be other more visual, more direct ways to know that this company is not doing well but dividend can be a very real and practical way for you to know that something is wrong meaning that they are not making as much profit they use to. Usually, they’ll pay dividends when they make a lot of profit and even in the surplus and often times as well, the amount of dividends they pay could also tell you.
For instance, if they’re paying 1 dollar per dividend this year and then the next year they pay 50 cents , you’ll know that they might not be doing as well as last year or they now decide to pay 2 dollars and you can tell that they might be making more than they did previously. So, these are ways that dividends can help you analyze a company and it’s performance.
With MTN currently, paying dividends is actually a good sign for everyone who has bought their shares to tell you that the company is doing well. Physically looking at the shares from the time of purchase and to this point, it has gone up from 20-47 percent increase in the value or worth of the shares.
NB: Dividends are decided by the company, it is not compulsory or mandatory. Another thing to note is that dividends are not periodic, it is also decided by the company as well. The last thing to note is that dividends could be a pointer or a metric to measure a company’s performance.
If you’re not clear or you still have questions regarding dividends or investing, please do leave a comment in the comment section and I will do my best to answer the question to the best of my knowledge. Thank you!
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