Dividends

Dividends are portions of a company’s profits that are returned to stockholders. They’re often used to reward investors for owning the company’s stock.

Dividends can provide regular income for many investors. For example, if a stockholder has 100 shares of a company, and the organization provides a $2 dividend per share, the stockholder earns $200 (100x2). They are usually delivered on a regular basis like quarterly, semiannually, or annually. A company isn’t required to pay dividends to shareholders unless otherwise stated by the company’s board of directors. To receive dividends, investors must own the stock before the ex-dividend date.

Many well-established, stable companies pay dividends. Instead of reinvesting excess earnings back into their business, companies pay stockholders through cash dividends (the most common) or additional stock. Many organizations, from energy, utilities, and financial services, pay dividends. Technology companies often don’t pay dividends because they’re focused on growing the company with the excess profits. Dividend yield is a good measurement of how much money companies return to shareholders.