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Dividend is, in fact, the payment of a portion of the company's profits that is allocated to shareholders. The purpose of this distribution of profits to shareholders is to attract new shareholders. Dividend is a reward that the company pays to shareholders for their long-term investment in that company. Public companies can decide to distribute a part of their company's profits to shareholders. The dividend announcement that the company publishes causes the stock price to rise, but the dividend itself causes the company's stock price to fall.