Specific business organizations need to raise money from the public. A company may need money to start a business or to start a new project. The sum of money required is called capital. The required capital is divided into small equal parts, and each part is called a share. A person who purchases shares of the company becomes a shareholder of the company. The part of the annual profit of a company distributed among its shareholders is called the dividend.
Firstly, the term share is defined and then some basic terms like nominal value (N.V), market value (M.V), at a premium, at a discount and dividend are discussed in this chapter. Dividends take money out of the company, which has an impact on the company share price. For example, if a stock is trading at $100 and pays a quarterly dividend of $3 per share, then the stock will open on the ex-dividend date at $97. Earnings per share and dividends per share are both reflections of a company's profitability.
Dividends per share, on the other hand, measures the portion of a company's earnings that is paid out to shareholders.