What is a Dividend?

A Cash Distribution by a Company to its shareholders.

For Example, Let’s look at XYZ footwear, for the first shop XYZ gathers money from the investor and issues shares, it become hit and sales are skyrocket. XYZ footwear increases the retail shops more and more. Soon the footwear shops are competing each other this is called as Market Saturation. Instead of opening more shops XYZ focus on keeping sales strong on existing shops. Profits continue to roll-in. XYZ having choice of investing his profits or simply paying it to the share holders. So XYZ sells footwear and not thinking he can cook profit by investing so he decided to payout some profit regularly as Dividend to share holders. He holds some profit in case of emergency and pays out all the cash doesn’t need to run the business as Dividend. It can increase or decrease yearly according to the XYZ business performs.