Capital Gains and Dividends

There are two main ways that you can benefit from stocks investments

1. Capital Gains

Capital gain is the increase in a capital asset value and it is considered to be realized when you sell the asset. Assume you have bought shares of company X at a price of Kshs 10 and after three years you sell the shares of company X at Kshs 30. Your capital gain is Kshs 20. You can also calculate the Capital gain yield by dividing the increased price by the original buying price. In our case the capital gain yield from company X stocks is 200%. 

2. Dividends

A dividend is the distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors. Common shareholders of dividend-paying companies are typically eligible as long as they own the stock by the ex-dividend date. Dividends may be paid out as cash or in the form of additional stock.