I just got dividends from OCBC, and I love the feeling of dividends. Some people call it passive income. In other words, money I don’t have to work for.
What are dividends?
A simple way to think about it is this, a company’s goal is to earn money and make profits. These profits can be used in 2 different forms. Firstly, the company can reinvest these profits back into the business. Secondly the company can distribute these profits as dividends.
Giving you a real world example. Lets say you own a coffeeshop. The coffeeshop makes money through selling coffee. After a year, your coffeeshop makes $100k. With that $100k, you can choose to open another branch(reinvest) or keep all the profits to yourself(dividends). Therefore, if you decide to keep these profits to yourself, you have dividends.
Which is why I like to look at this chart, because it shows you returns based on your investments