Saturday, 26 September 2009

Why is dividend important?

The most important reason is dividend is the only benefit from which a shareholder can obtain from a company under the normal circumstances. 

Earnings, per se, is hardly of any use to him directly and the assets are only of value if the company is liquidated which is unlikely in a great majority of cases.

Apart from the above reason, dividend is important for the following reasons:

(1)  Dividend is a sure thing. 
(2)  Dividend provides a link with reality.
(3)  Dividend provides a "floor" for shares during bear markets.
(4)  Dividend yield prevents investors from being side-tracked by irrelevant events.


A cow for its milk,
Bees for their honey,
And shares, by golly,
For their dividends.

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