Speaker: What is a Stock? In exchange for cash, the investor can buy a proportion of a company – called a stock or share. If the company does well the share price will go up, and the shareholder can crystallise this gain by selling the share. If the company does badly the share price will fall – this is the risk of being a shareholder and having what is known as equity investments.

Companies with spare cash will often chose to reward loyal shareholders with a pay-out known as a dividend. Large cash-generative companies pay a regular dividend either once, twice or four times a year. If one company buys another, or sells off some assets it may pay a one-off special dividend.

This animation was created by Morningstar UK video producer Roberto Iacurci

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