Dividend Yield Definition and Ex Dividend Definition
We have to accept this fact that financial terms are not a part of our daily vocabulary, therefore learning their meaning is necessary before investing because paying the cost of misunderstanding can be costly. This rule of thumb applies to all terms in finance, but this time we are going to talk about ex dividend definition and dividend yield definition.
A dividends yield is a percentage return from dividends income, which is based on share pricing. This yield is paid annually . When there are not capital gains, dividend yield is defined by return on stock investment, in both dividend yield definition and ex dividend definition, dividend yield helps investors to determine the amount of cash flow obtained for every dollar invested in an equity position.
In the past, investors used to look at dividends coming from their share holdings to secure cash flow by investing in stock paying higher dividends. Today they are more concerned about capital gains investing in stocks that pay higher. Therefore, dividend definition can be explained as the portion of a company’s earnings which are paid to shareholders.
On the other hand, ex dividend definition refers to the classification of trading shares belonging to a seller instead of the person acquiring such shares, but once the corporation has authorized the seller to receive such dividends.
Shareholders remain qualified to receive dividends, but difference between dividend yield definition and ex dividend definition strives on the date in which shares are sold for dividends payment, either coming from registrars or the stock exchange, so makes no difference who is the new shareholder when it comes to receive a payment after sale, although once an ex date is declared, stock drops often in price proportionally to the total amount of dividends a seller may expect.
There are companies that offer dividend reinvestment plans and these are for those who are looking for good passive income by dividends.
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