One sunny spring day, Steady the turtle and Zippy the rabbit were relaxing under a shady tree, chatting quietly.
Steady opened his notebook and looked puzzled.
“I heard my older brother talking about something called a ‘dividend’ the other day…”
Steady muttered thoughtfully.
“He said that you get money just by owning stocks, but how does that work? Why does it happen?”
Just then, Steady’s older brother appeared, holding a cup of coffee and taking off his sunglasses.
“Hey, perfect timing! Today, I’ll explain what dividends are all about!”
🌱 What Exactly Is a Dividend?
“A dividend is like a thank-you gift from a company to its shareholders when the company makes a profit,”
explained the older brother.
Zippy’s eyes sparkled with curiosity.
“Wait, so you get money just by owning stocks?!”
“That’s right! When you own stock, you actually own a part of the company. So when the company does well, it shares some of the profits with its owners — the shareholders.”
🎮 Let’s Imagine This!
“Say you own stocks in your favorite video game company, Zippy,” the older brother said.
“Got it!”
“If that company makes a lot of money from their games, they might decide to give out dividends as a ‘thank you’ to their shareholders.”
For example, if the company announces a dividend of $1 per share and you own 10 shares, you’ll receive:
$1 × 10 shares = $10!
“Wow, I could buy a new game with that!” Zippy jumped up happily.
📅 When and How Are Dividends Decided?
“The company decides whether to pay dividends or not. Some companies pay dividends every year, while others don’t pay at all,”
the older brother explained.
“Wait, some companies don’t pay dividends?” Zippy asked, surprised.
“Yes, some companies prefer to reinvest their profits to grow the business instead of paying dividends. Not getting dividends doesn’t mean the company is bad,” he added.
🧃 Two Ways to Profit From Stocks!
The older brother drew two fruits on a branch.
“There are two main ways to make money from stocks,” he said.
- Profit from selling the stock at a higher price than you bought it (capital gains)
- Getting money paid regularly as dividends (income gains)
“So if the stock price goes up, that’s great! And if you get dividends on top of that, even better!”
Zippy clapped his hands excitedly.
⚠️ What Should You Watch Out For?
✅ Good points:
- You can earn money even without selling the stock!
- Dividends can add up if you hold stocks for a long time.
⚠️ Things to be careful about:
- Dividends depend on the company’s decisions.
- In bad economic times, companies might reduce or stop dividends.
🐢 Steady’s Notes 📝
- A dividend is a company’s “thank you” money to shareholders
- Stock owners may receive dividends as a reward
- Whether dividends are paid depends on the company
- Stocks offer two ways to earn: price increase and dividends
🎓 Three Dividend Quiz Questions!
Q1. What is the money paid to shareholders by a company called?
A) Salary B) Tax C) Dividend
Q2. Who decides whether to pay dividends?
A) Shareholders B) The company C) The bank
Q3. Which is NOT a way to earn money from stocks?
A) Profit from selling stocks at a higher price
B) Receiving dividends
C) Winning a lottery ticket
👉 Answers: Q1 – C, Q2 – B, Q3 – C
Steady nodded and closed his notebook.
“Now I feel like owning stocks is like cheering for a team!”
Zippy smiled brightly.
“If I got dividends, I’d want to cheer for that company even more!”
“That’s the fun part of investing,”
said the older brother, as the gentle spring breeze carried the aroma of his coffee.
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