What Is a Dividend? How Dividend Investing Works
Understand how companies share profits with shareholders through dividends.
Dividend
is a cash payment a company makes to shareholders from its profits, typically paid quarterly.
Not all stocks pay dividends. Growth companies reinvest profits; mature companies often pay dividends.
Dividend = cash from company to shareholders. Yield = Annual Dividend ÷ Price. Must own before ex-dividend date. Great for income investors.
What Is a Dividend?
A dividend is a cash payment companies make to shareholders from profits. Own 1,000 shares of a stock paying $2/year, receive $2,000 annually.
Key Dates
- Ex-Dividend Date: Must own BEFORE this to receive dividend
- Payment Date: Money hits your account
Dividend Yield
Yield = Annual Dividend ÷ Stock Price. A $100 stock paying $3/year = 3% yield.
Key Takeaways
- Dividends = cash payments to shareholders
- Yield = Dividend ÷ Price
- Options traders: watch ex-dividend dates for assignment risk
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