1. Stock Price Appreciation
Stock price move depending on demand and supply. Over the years, the price of a stock can either go up or down.
You will earn if you sell your stock higher than the price you bought it.
Example:
See the chart below. If you bought SM Prime Holdings share at the beginning of this year at P26 per share, you can currently (October 31, 2017) sell it at P37 per share. You'll have a profit of P11 per share. If you bought 1000 shares of SMPH last January 2017, you'll now have an P11,000 profit from it. I couldn't explain it more simply.
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| chart from Bloomberg |
2. Stock dividends
Aside from the price appreciation, some companies give dividends to their shareholders. If the company business is good and profits are big, they usually give their shareholders a taste of the profit too.
Look at the example below. We can see that Security Bank gave dividends of P0.50 and another P1.00 last May, 2017. And again, another set of dividends this November 2017. P1 per share might not look big enough, but that will add up if you have a lot of shares in your portfolio.
Note: Not all listed companies give dividends. If your'e after the dividend, please make sure to check first if the company you're buying gives dividends.
Conclusion
That's the only two ways you can earn in the Philippine Stock market(as far as I know). Price appreciation and dividends, if mixed together, can give you substantial profits. Some people who wants to invest in longer term usually chooses dividend giving companies, but some people focus only on price appreciation and prefers to buy and sell stocks instead.
It's up to you which one you want to do. Or you can do both too if you want.
Alex (October 31, 2017)
