How Does a Shareholder Get Paid?

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A person who owns shares of stock in a particular company is known as a shareholder. These shares are essentially an ownership stake in the company. The value of these shares will generally fluctuate, in line with what investors believe the company to be worth. While investors may buy shares for a number of reasons, most do so to make money. Shareholders can be paid for their investment in several ways.

Shares of Stock

  • Although merely a sheet of paper, a share of stock can be considered an asset. However, instead of being linked to a tangible asset, the share of stock is linked to a business concern that generates profits through the production of goods and services. This means that the value of the stock is generated either through the receipt of profits from the company or the resale of the stock at an appreciated price.

Dividends

  • Some companies choose to disburse a percentage of their revenues to shareholders in the form of dividends. Dividends are quarterly payments that represent a percentage of the amount of money that the company made that quarter. How these dividends are calculated depends on the company, but many investors choose to purchase stocks that pay out quarterly dividends, as these provide the investors with a regular source of income.

Selling at a Profit

  • In many cases, investors get paid through the purchase of stocks by buying the stock at one price and then reselling it at another, higher price. This can be tricky, as there is no certain way to predict whether a stock will rise in value. An investor must identify a company that it believes is currently undervalued by investors or that it believes will become more popular in the future, causing it to rise in price.

Methods of Payment

  • The method by which a shareholder gets paid will depend in large part on the policies of the brokerage he uses. Most brokerages require that a person maintain an account with them. The assets in this account are used to buy and sell stocks. When a person wishes to draw money from this account -- money accrued from dividends or from the profitable sale of stock -- he can have this money transferred to his bank account or have a check made out to him.

References

  • "Economics"; Roger A. Arnold; 2009
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