Introductory Stock Basics (Section 3)

This section talks about the sources of stock profits. There are generally two sources of stock profits. One is the dividend received by shareholders when the company distributes earnings, and the other is the price difference between stock buying and selling.


When the company you invest in makes money, it will distribute the profits to you according to the proportion of all shares held by you. At this time, the profits you get are dividends. Dividends can be divided into two types: stock dividends; 1. Cash dividends. It should be noted that when the company does not make money, shareholders may not receive dividends at all.

  1. Stock dividends

The so-called dividend is that the company distributes its profits to shareholders. When the investor buys the shares of the company, it represents that the investor becomes a shareholder of the company. When the company makes money, shareholders can naturally enjoy benefits.

Suppose Company A made a profit last year. The company's distribution plan is to give 4 shares for every 10 shares to shareholders, which is called stock dividend. If you have 1000 shares of Company A, so you can get 400 stock dividends, your total shareholding will increase to 1400 shares.

  1. Cash dividends

Continuing from the previous example, if Company A's distribution plan is to pay 3 yuan (tax included) for every 10 shares, it will be paid in cash, that is, cash dividends. As for the number of your shares, there is no change, or maintain at 1000 shares.

Stock spread

When the stock on the market is in short supply, the ticket price of the stock will rise. So if investors can buy low and sell high, they can earn the difference. That is, profit from price fluctuations. This profit method does not need to study the performance. It does not profit from the growth of performance, but from the fluctuation of stock price. The core of this profit source is to study the emotional fluctuation of the market and profit from the emotional fluctuation of the price. Short term profits are the main source of profits.

Receive dividends

In the Shanghai and Shenzhen stock markets, the stock exchanges and registration companies assist in dividend distribution. The treatment of bonus shares by listed companies in Shanghai Stock Exchange is the same as that in Shenzhen Stock Exchange, but the cash dividend requires shareholders to go to the securities firm to perform relevant procedures, that is, shareholders will sell the dividend over the counter as cash dividend right within the specified period, and the dividend payment will be transferred into the capital account by the securities firm. If the procedures are not handled within the time limit, the securities firm shall be entrusted to handle the relevant procedures at the stock exchange. When distributing dividends, the registration company of Shenzhen Stock Exchange will directly log the distributed bonus shares into the stock account of the shareholders, and transfer the cash dividends to the capital account of the shareholders through the securities dealer opened by the shareholders.