What is a cash dividend?

When you buy stocks or shares in a company you become a shareholder. When that company earns a profit, it may start to pay back some of the money that had been invested in it. These payments are called dividends and they are usually paid in cash.

Where have you heard about cash dividends?

You will have heard about cash dividends if you have ever invested in stocks or shares. They are considered a reward for investing in the company.

What you need to know about cash dividends...

Cash dividends are usually paid on a per-share basis. So if you have more shares in a company then you'll tend to receive a greater yield. Some experts recommend investing in companies that have a history of offering dividends as a good way of complementing your portfolio.

It's worth noting that if a company can pay out cash dividends then it's usually a good sign of financial health. Although dividends are almost never guaranteed and it's important to recognise that past performance is no indicator of future success.