Dividends are shares in a company’s profits that are paid to stockholders in cash, and in some rare instances stock. They represent one of the most common ways investors can make money from stock aside from selling appreciated stock.

Why Do Companies Pay Dividends?

Offering dividends can be a smart move on the company’s part. They can signal that the business is robust and financially healthy, drawing the attention of investors looking for income, which in turn may potentially drive up share prices.

How Do Dividends Get Paid Out?

Dividends are usually paid out quarterly—though some pay out monthly. They are paid on a per-share basis, typically in cash.

Are Dividends Guaranteed?

It’s important to note that though dividend payments are usually paid on a regular basis, they are not guaranteed.

Which Companies Pay Dividends?

Generally speaking, large, mature companies that are not currently focused on fast growth offer dividends. For example, most companies in the S&P 500 Index, which represents the 500 largest U.S. companies by market capitalization, pay dividends.

How Do Dividends Affect Stock Prices?

In the short-term, dividends can drive down the price of a stock a little bit. That’s because investors who buy the stock on or after the ex-dividend date don’t get to benefit from the upcoming round of dividends.

How Are Dividends Taxed?

If you receive dividends in a taxable brokerage account, they are considered taxable income and will be taxed at your regular income tax rate or as long-term capital gains.

How to Calculate Dividends

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Are Fractional Shares Worth Buying?

What’s the Difference Between Income and Net Worth?

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