Dividends for shareholder

Shareholders are entitled to take part in the company’s success and profits. Normally shareholders participate in the company’s profits by way of dividends, which are usually paid twice a year, but this is not a legal right since a company may decide to reinvest its profits in the business for faster growth. In practice few have the courage to refrain from paying altogether. The cheque, or notification of payment into an account, shows the size of holding and rate of dividend. Preference shares are normally entitled to a dividend, and if the company cannot for a time afford to pay, that entitlement is normally only deferred and has to be paid later when the money is available.

Source: Becket Michael (2014), How the Stock Market Works: A Beginner’s Guide to Investment, Kogan Page; Fifth edition.