The Benefit of Dividends

When deciding on investment avenues in equities, most investors think in terms of what income will come only by way of capital appreciation. Seldom do they think that there are a lot of good companies that have been paying handsome dividends annually.

Dividends are payments by a company to its shareholders given out of the profits it makes. It is calculated as a percentage or absolute value per share. Not all companies pay dividends. Some plough it back into business, to generate returns in the future. Others don’t pay due to cash flow requirements. But even after having attained scale capabilities, some capital expenditure-intensive companies do not pay dividend or don’t pay good dividend, as they have to retain cash for their own requirement. India’s largest telecommunication company, Bharti Airtel, had huge capital expenditure in the past few years, so it paid negligible dividends to the shareholders.

Source: Business Standard

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