How do dividends on stock work?

Question

I have a few questions about the stock market...

Could someone please clarify the difference between the Nasdaq and DOW Jones? How do dividends work when buying shares of a company? What are those people trying to accomplish going crazy at the New York stock exchange?

Sorry if my question seems vague and uneducated, but I was never taught anything about the stock market, and I'd like to at least try and understand it.

Answer 1

The DOW and Nasdaq are indexes made up of different stocks.  The stocks in the DOW tend to be very large, while those in the NASDAQ tend to be either technology or smaller companies.

Dividends are payments made by a corporation to its shareholder members. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

For a joint stock company, a dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of an asset among shareholders. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one.

Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense.

Dividends are usually settled on a cash basis, as a payment from the company to the shareholder. They can take other forms, such as store credits (common among retail consumers' cooperatives) and shares in the company (either newly-created shares or existing shares bought in the market.) Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.

People at the stock exchanges try to make money by betting on the direction of stocks.

Answer 2

NASDAQ is a market where they trade securities,

DOW Jones is a publishing company that provides market or security information

Company pays money (dividends) to all its current shareholder,

People on the floor are buying and selling securities, there is nothing crazy about it.

Here's some websites for you

http://moneycentral.msn.com/home.asp

http://finance.yahoo.com/

http://www.investors.com/?tn=top

http://investorshub.advfn.com/default.as...

http://www.thestreet.com

http://www.brokerage101.com/

http://www.1source4stocks.com/

http://www.decisionpoint.com/TAcourse/TA...

http://stockcharts.com/

http://www.grahaminvestor.com/

http://www.thestreet.com/

http://www.morningstar.com/

http://www.dividenddetective.com/

have fun, study hard

Answer 3

Dividends are like interest you get in your bank account. Most pay twice a year. A company makes the profit say 60 million. That 60 mill is divided into 3 pots. 1 re investment genrally for expansion projects 2 is the dividend pot paid to share holders and bonuses 3 straight into the company pot which pushes the company value up so the shares of the company rise. The managing director decides how much goes into each pot. If you buy a large company shares with a good dividend at a low price it is a great long term investment