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Dividend is the income you receive as a shareholder from a company.

When you buy an ordinary share in a company you become a shareholder of the business and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders. A dividend is a cut of the profits earned by the business for the year. This pay-out is not guaranteed and where it exists at all, the amount you’ll receive will vary from company to company and year to year.

High-growth companies rarely offer dividends because all of their profits are reinvested to help sustain higher-than-average growth. Conversely, larger companies have less potential for rapid capital growth but are more likely to pay healthy dividends which are steadily rising as the years go by.

Certain dividend is tax exempted which mean that no tax for that dividend income. In the case of taxable dividend income, you will only receive the net dividend after tax deduction.

Interim, First and Final and Final Dividend

Interim dividend is a dividend paid out by the company when the directors have received the interim (half year) financial results. The final dividend is paid when the final profits are shown in the final accounts. The first and final dividend is the only dividend paid out for that financial year. There are some companies that gives special dividend after the final dividend.

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