Are your dividends safe?

By Deputy editor Tim Bennett Apr 08, 2011

Tim Bennett

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Tim Bennett explains the 'dividend cover ratio' - a crucial ratio for anyone investing in income-generating stocks. See also: What is a dividend yield? , and watch all of Tim's video tutorials here

Dividend

A dividend is the part of a company's profits that are distributed to shareholders. They are usually given as cash (cash dividend), but can also be given in the forms of stock (stock dividend). High-growth companies seldom offer dividends, because they are more concerned with reinvesting profits in the business. This is so they can maintain above average growth. However, as companies mature they will often offer dividends to shareholders to sustain investors' interest by means other than mere capital appreciation. Dividend payments also send out a message that the company is financially stable and on the right track as dividends are a good sign of the company's financial health.

• Entry from MoneyWeek's Financial glossary.

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Published in Video tutorials | More articles by Tim Bennett

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  • 1. Jim

    (17 April 2011, 03:45PM)  Complain about this comment

    Very useful, something I'm going to factor into my spreadsheets, thanks very much.

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