What are Stocks? Stocks Represent Ownership in a Company
Feb 7, 1999. A stock is a certificate of ownership in a corporation. There are two types of stocks;
common and preferred. The latter performs more like a debt instrument, with a stated dividend return. A dividend
is the company’s way of sharing its earnings and profits with the stockholder, with a cash payment each quarter.
Not all profitable companies pay dividends, however. Some outstanding corporations reinvest all their profits back
into growing the company.
Common stocks can be classified into three categories; growth and income, growth, or aggressive
Growth and income stocks pay a meaningful dividend, say at least 2 percent. These include stocks
considered blue chips; that is, stocks with long histories of growing profits and dividends.
Growth stock companies concentrate more on the growth of sales and earnings, without any particular
concern for paying out dividends.
Aggressive growth stocks are those of newer, more speculative companies that carry greater risks.