What is dividend?

Dividend is the return paid to shareholders out of the profits of the company.
Dividends can be in the form of cash or additional shares
of the company called stock dividend or bonus shares.
Dividends are usually paid once or more than once in a
year depending upon the company’s pay-out policy. The
dividend paid at the end of the financial year is called
Final Dividend, whereas dividend(s) paid during the year on the basis of
periodical results of the company are called Interim Dividends.
7.5 What is capital growth?
This is one of the ways in which investment in shares differ from
placing money in deposit accounts. The principal amount of
money placed in a bank or any fixed income savings scheme
always stays the same except profit earned at a fixed rate is paid
to the investor. Changes in the value of shares of a company occur
according to the performance of the company. With good
management and corporate governance, the value of your
investment in shares of a company can grow multiple times over
the period. This is capital growth.
7.6 Risks and rewards:
Investing in shares generally gives better returns as compared with other
investment avenues. Your investment may increase in value besides paying
you dividends. You share the rewards when the company does well and the
price of the shares goes up. However, it is important to remember that share
prices are sensitive to market sentiment and are very volatile. Thus shares
are not a suitable investment unless you invest funds for a long term that
will be disinvested only when market conditions are favourable. The funds
that might be needed in an emergency may force a distress sale when the
market might happen to be down.