For companies, stocks are a great way to raise money to grow funds and capital or other products and initiatives. When you buy a stock of a company you are effectively buying a part of ownership or share in the company. It does not exactly mean you will sit next to Mark Zuckerberg in a meeting at Facebook if you buy a stock from Facebook. It means you get the right to vote in meetings when chosen to exercise it. Primarily, the reason to invest in the stock is to earn a return on the investment, and the return generally comes in two ways.

1. Price appreciation

This means when the stock goes up, you can sell it for a profit if you like.

2. Dividend

This exactly means payments made to the shareholder out of the company's revenue, and typically they are paid quarterly but just remember not all stocks pay a dividend.

All the stocks are not the same though. US stocks, for example, are so far the most diverse in the world. They come from a market of around 500 of the biggest companies in the world and not every single stock of these companies is the same. Each stock has a varied feature and different characteristics, which give the shareholders different kinds of benefits. A shareholder chooses his stock based on his capital, what kind of returns he expects, and on what tenure. So it is wise to know what kind of stocks are out in the market.

Domestic And International Stocks

You can categorise the stock based on the location. To distinguish them from each other most investors look at the location of the company and its official headquarters. It is important to understand that the stocks Geography category does not correspond to where the sales happen. For instance, a stock that you buy can have the company headquarter in the US but sell this product exclusively out of the country. You can see this in large multinational companies.

Growth And Value Stocks

A growth stock is a stock that has a high-risk level but at the same time a very attractive return. Growth stocks rise in demand among customers and the environment and are more interlinked with the long-term trend. And competition for this growth stock is highly intense in the market, and several times rivals disrupt the business. Investors who invest in growth stocks look for companies that have sales and profits rise tremendously quickly.

Value stocks, on the other hand, are a more conservative investment. They often show stocks already in the growth phase of the industry and take the leading space. There is not much room left to expand for them, and no new inventions are coming up. Yet, the risk involved in this stock is comparatively lesser than a growth stock. They are good choices for people who look for more price stability while setting some of the positives of exposure to stocks. Value investors search for companies whose shares are inexpensive. Value share is comparatively lower in price.

IPO stocks

IPO stocks are the companies that have recently gone public. They usually generate a lot of excitement among the investors who look to get to the bottom of a promising business concept. They are also highly volatile, especially when there is disagreement within the investment community about growth and profit. It remains private for a minimum of a year or as long as 2 to 4 years after it becomes public.

Dividend stocks

Dividend stocks or income stocks are the stocks that pay out forms of dividends. They are also referred to as shares of companies that are more mature businesses and have relatively few long-term opportunities for growth. An ideal conservative investor who needs to draw cash from an investment portfolio right away would be strongly choosing a dividend stock. An investor who would choose this stock would be and investors who have a low-risk tolerance or someone who is nearing their retirement phase and are looking out for a safe keeps out

Safe Stocks

These stock prices do not move fast or in a big amount. They are not affected by the overall market, and they come from Industries that do not get affected by the economic conditions. They offer paid dividends, and by that income can be set even during falling share prices during tough times. They are also known as low volatility stocks and operate in industries that are comparatively safer than the others.

Blue-chip stocks

These stocks come from the most reputed companies in the market. They come from companies that lead the industries. They do not provide a higher return but are known for their stability in the market. This feature makes them a favourite kind of stock for many investors. They have a high reputation in the market and hold a low-risk possibility. 

Penny stocks 

Penny stocks are contradictory to Blue chip stocks. They are highly inexpensive, of low quality, and come from companies whose stock prices are extremely low, typically less than a dollar per share. At the same time, they are highly dangerous in speculative Business models and prone to a scheme that can drain your entire investment. They are dangerous, but the benefit is that they are highly inexpensive, and you can easily afford them.

Conclusion

Portfolio diversification is a necessity if you want to be a good player in the stock market. You probably heard of portfolio diversification, it is very important to develop strong and stable investments. All of these stock classifications can plan for your diversity and investments across companies of different markets, geographies, and styles. You can have a well-balanced portfolio across various diversification and simultaneously raise money. Each stock has a different feature, and you have a wide choice to know which would best suit you.

Below Lee Wild, Head of Equity Strategy at Interactive Investor, discusses dividend cheques and payouts to shareholders over the next month.

Over the next four weeks, some of the UK’s biggest companies will send dividend cheques to shareholders totalling a staggering £8.2 billion.  And the good news is that almost everyone invested in a pension will get something.

Whether directly, or indirectly through a fund or other collective investment, it’s almost certain most of us own a stake in Rio Tinto, Legal & General, SSE, Prudential, GlaxoSmithKline, Diageo, Barclays, Royal Dutch Shell (the largest company on the London Stock Exchange), and Lloyds Banking Group, the UK’s most widely-owned share.

This is a strong reminder that London is home to some of the world's best income stocks. These blue-chip dividends are not only among the most generous, but they are also affordable and sustainable, easily covered by profits and cash flow from operations.

There have been question marks around Royal Dutch Shell. It paid a total of $15 billion in dividends to shareholders in 2016, but the plunge in oil prices from over $100 a barrel to below $30 hit profits. However, the oil major has not cut its dividend since the Second World War, and chief executive Ben van Beurden had been borrowing to maintain that record.

But, after buying BG Group and completing over half its target for $30 billion of asset sales, Shell did generate enough cash over the past 12 months to cover both the dividend and reduce debt.

It’s also great to see Lloyds Banking Group and Rio Tinto back as serious income plays. Both have undergone major transformations following the financial crisis and collapse in commodity prices, and now yield 7% and 5% respectively.

After a six-year break during the financial crisis, Lloyds has successfully repaired its balance sheet and returned to the dividend list in 2015. It’s now expected to keep growing the dividend, and any increase in UK interest rates would be a significant boost to the lender’s profit margins.

Rio Tinto has staged an impressive recovery since the commodity sector crash finally ended 18 months ago, and streamlining the business has provided firepower to increase its latest interim dividend by 144% in dollar terms.

Barclays presents shareholders with a problem. As the only UK bank share in negative territory in 2017 so far, down over 14%, it’s the cheapest high street lender out there, trading at a discount to book value. Its restructuring is complete, too, but PPI and other conduct issues may continue to cap share price gains.

However, if City estimates are correct, the dividend will more than double in 2018 and give a forward yield of over 4%.

With interest rates at a record low, there are currently few asset classes that match equities for income generation potential. The global economy is ticking along nicely, company profits are improving and valuations do not appear stretched among this crop of blue-chips.

In the absence of any market event that significantly shifts the dial, it’s likely investors will continue to benefit as companies return those profits to shareholders.

*Excludes Rio Tinto Limited

Lloyds Banking Group has announced it is to pay its first shareholder dividend in six years after posting a much improved financial performance for 2014.

The bank announced a statutory profit before tax of £1.8 billion, a considerable increase on 2013’s figure of £0.4 billion. As a result, it is recommending a dividend of 0.75 pence per share in respect of 2014, amounting to £535 million.

Lloyds recorded a 26% increase in underlying profit, to £7.8 billion (2013: £6.2 billion) while its return on risk-weighted assets increased to 3.02% (2013: 2.14%)

Income was up 1% to £18.4 billion, excluding St. James’s Place effects in 2013. Net interest income up 8%, driven by margin improvement to 2.45%.

“Over the last four years we have transformed Lloyds Banking Group into a low cost, low risk, UK focused retail and commercial bank. This has been made possible by the hard work of everyone at the Group. Today’s results also demonstrate that our profitability and capital position have improved significantly, and this has enabled the Board, for the first time in over six years, to recommend we pay a dividend to our shareholders,” said António Horta-Osório, Group Chief Executive.

“While we recognise we have more to do, we enter the next phase of our strategy from a position of strength. We will remain focused on our customers, embrace the digital age throughout the whole Group, continue our support for the UK economy and aim to deliver strong and sustainable returns for our shareholders.”