What is a Dividend? A Simple Explanation + 4 Tips

Whether you are just starting to invest or have been investing for decades, dividends can be a valuable part of anyone’s investing portfolio. 

What is a Dividend? A Simple Explanation + 4 Tips

Dividends can provide income and growth for long-term investments. In addition, many times, there will be options to reinvest dividends back into the same company automatically.

What is a Dividend?

Dividend Example

On the payment day, you’ll receive $150 worth of dividends. After that, however, the stock price will likely drop the same $1.50 as the company is technically worth that much less after paying its shareholders that amount per share.

Many companies that payout dividends are well-established and stable companies. By paying a dividend, they attract investors creating more demand for their stock.

Why Companies Pay Dividends

Why Companies Don’t Pay Dividends

Many companies won’t pay dividends for several reasons, the biggest being it hurts their bottom line. That is much less cash the company has and is therefore much less valuable when paying out dividends.

Earning a dividend is an easy feat to accomplish. The company will automatically pay to your brokerage account at distribution time by buying a stock or mutual fund that pays out dividends.

How Do You Earn A Dividend?

Four Companies That Pay Dividends

As mentioned earlier, many of the companies that pay out dividends are long-standing, well-established companies. As a result, they will pay out dividends to continually attract investors, further pushing their stock price. 

In most cases, companies pay dividends four times a year every quarter. However, companies can decide to pay out dividends at different intervals if they like. 

When Do Companies Payout