When someone buys stock, they buy a small part of a company. They earn the right to share in a company’s profits and losses. They can make money if the value of the company goes up. Then they sell their stock for more than they paid. There is another way that people earn money from stocks. Some people own shares of stocks that pay dividends.
A Percent of the Profits
When a company pays a dividend, it gives some of its profits directly to the stockowners. The more shares of stock a person owns, the more money they’ll receive. For instance, if a stock pays a dividend of 75 cents a share, someone who owns 85 shares will receive . Stable companies such as Coca Cola and electric companies offer dividends on their stocks. People hold these stocks for years at a time.
Elderly people often use dividends from stocks to supplement their income from Social Security. While dividends don’t offer the huge profits that can come from buying and selling stocks, they also carry fewer risks. They’re a good investment for people looking for steady, reliable income.
See for yourself: http://video.cnbc.com/gallery/?video=3000188159
Watch the following videos to learn more about stocks and dividends.