Video: How do Shareholders Get Money?

How do Shareholders Get Money?

Shareholders get money by a corporation earning profits, which increases stock value, or through dividends that are distributed to stockholders by a business when it earns profits. Learn the difference between stocks and dividends with insight from a lawyer in this free video on business law.

Video Transcript

You've just invested in the stock market for the first time and you're thrilled and excited but it suddenly dawns on you, how are you going to make any money off of this investment? Hello, I'm Robert Todd and I'm here to answer the question how do shareholders get money? Well there are basically two ways. The first way is when the corporation earns profits and does well over a period of time, generally speaking the value of the corporation increases. As the value of the corporation increases, the price per share of that corporation can be expected to increase as well. Now obviously until you sell that stock and realize the difference between the price that you paid for that share of stock and the price that you are selling, in this case hopefully a gain, you don't actually realize the gain. But when you sell it, you do realize the gain. The second way of course is dividends and dividends are also closely connected with how well a corporation is doing and what their earnings are. As a corporation earns profits and they have profits that they can distribute back to the individual shareholders, they actually pay the shareholders a portion of those profits and its known as a dividend. So those are the two ways that a shareholder can be paid from a corporation. I'm Robert Todd and thank you for watching.

How do Shareholders Get Money?

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