An investor can earn two types of returns on investment in shares; one is termed as capital gain that is result of price appreciation; the other is holding period gain (ie regular stream of income through dividends, bonus and right issues).
Dividends are returns paid to shareholders out of profits of the Company. Returns can be in the form of cash or additional shares of the Company called bonus shares. Dividends are usually paid once or twice a year depending upon the Company’s profit distribution policy.
- Capital Gain/Growth
Capital gain is the amount with which the value of the investment in shares exceeds the price at which it was purchased. In other words it is the profit realized from the sale of shares when the market value is increasing.