What Is A Dividend?
In this post, we are talking about dividends, what they are, and how they work.
Dividends are stock-related and are regular payments of a company’s profits made to their shareholders. In simpler terms, you invest in a company, and the company give you dividends in return, which are usually paid quarterly in cash. If you don’t want the money, you can reinvest the dividends to buy more shares (some funds do this automatically check our mutual funds vs. ETF post to learn more).
Dividends are paid depending on the number of shares you own, or DPS, which is dividends per share.
Example Of What Is A Dividend Yield
A company announces a $1 dividend per share, and you own 100 shares. You will then receive $100.
Based on where you live and how you own the share, you’ll get taxed on the dividend received.
A dividend share is a percent of the current market price and helps compare the dividends’ sizes. To calculate the dividend yield, you can divide the annual dividend by the stock’s price.
Dividend Aristocrats, such as Coca-Cola and Walmart, are members of the S&P 500 and have increased their dividend payments annually for 25 successive years.
Dividends are great for earning passive income! If you would like to learn more about passive income and escape the rat race you must check out this premium course hosted by Robert Kiyosaki.