A Cash Distribution by a Company to its shareholders.
For Example, Let’s look at XYZ footwear, for the first shop XYZ
gathers money from the investor and issues shares, it become hit and sales are
skyrocket. XYZ footwear increases the retail shops more and more. Soon the
footwear shops are competing each other this is called as Market Saturation.
Instead of opening more shops XYZ focus on keeping sales strong on existing
shops. Profits continue to roll-in. XYZ having choice of investing his profits
or simply paying it to the share holders. So XYZ sells footwear and not thinking
he can cook profit by investing so he decided to payout some profit regularly
as Dividend to share holders. He holds some profit in case of emergency
and pays out all the cash doesn’t need to run the business as Dividend. It can
increase or decrease yearly according to the XYZ business performs.
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