What Is a Dividend? How Dividend Investing Works
Understand how companies share profits with shareholders through dividends.
What is Dividend?
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.
TL;DR - Quick Answer
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
Related Options Strategies
Understanding related strategies helps you choose the best approach for your market outlook and risk tolerance. Each strategy has unique characteristics that make it suitable for different market conditions.
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