Two (2) Ways to Make Profit in Stocks:
- Capital Appreciation - also called capital gains. The profit after you buy and sell at a higher price. "Buy low, sell high". Expressed in percentage, difference in purchase price and sell price is the return.
- Dividends - on the declaration date in each quarter, the company decides what the dividend payout will be. The company that just paid $.25 per share quarterly dividend, would be listed a dividend of $1 (stated in a year).
Terminology:
TOTAL RETURN - the total money made from a stock's capital appreciation and dividend. Expressed in percentage.
STOCK SPLIT - when a company increases the number of shares outstanding without increasing shareholder's equity. Common split is 2-for-1. A company usually will not do a split unless it's optimistic and doing well.
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