When you own a inventory, you in reality hold ownership in the gathering that has distributed the inventory. This ownership allows you to persuaded rights and benefits. Sure, one basis that common people pay for inventory is to sell it following when it goes up in reward, on the other hand dividends are another cause.
Significance
Dividends are momentous in that they display that the convention made money. As a partial owner in the company, you have a right to the share of the profits.
Types
You receive your profit either by the company sending you cash, in the form of a cash dividend or the same value in more stocks.
Cash
If you have a brokerage account, cash dividends come as a credit to your account. For instance, they might issue 1 share for every 100 shares of stock you own. If you own less, you get a fractional share.
Taxes
If you hold the certificates yourself, it comes as a check or a direct deposit into your current account.
Stock as Dividends
Companies may be short on cash and issue stock dividends.Cash dividends are immediately taxable, but stock dividends aren't. The Internal Revenue Service taxes the stock dividends when you sell them.
Reinvestment
Reinvesting the dividends into stock is not the same as a stock dividend for tax purposes. You still owe taxes on the dividend and later, if you sell the share, you pay capital gains tax on any profit.
