Dividends - What Are They And How Can I Get Some?

photo credit: cbcastro

You might want to read a previous article I wrote about stocks.

Since I talked about stocks in a previous article, it’s time to explain a bit about the way they can pay out over time, in the form of dividends.

This is meant to be a very basic guide, not at all a comprehensive and detailed article. Look at it more in the terms of learning the basics, knowing what the language is in the world of finance, so you can be prepared to handle you money better.

What Are Dividends?

Dividends are payments that a corporation makes to it’s stockholders, which represent a part of the profits (how much you make is proportional to how many shares you own).

Not all stocks pay out dividends! The companies that pay out dividends are those that have reached their growth limit and don’t have much to gain from reinvesting their profits.  The companies that don’t pay dividents are those that are looking for growth and plan to reinvest their profits.

How Do They Pay?

Dividends can pay in cash, stock or property (goods that the company makes). They are usually paid every quarter of the year (4 times a year). For example, if a dividend pays $1, you will receive $0.25 per share every 3 months.

The preffered stock dividend is set, and must be paid before the common stock dividend, which is decided by the Board of Directors.

You can choose not to get you dividend, but to reinvest it with the help of a dividend reinvestment plan (DRIP): the value of the dividend will be used to buy additional shares. 

This is all for now, of course there’s much more to say about dividends, but I just wanted to “scratch the surface” here, and learn together the basics.

I hope you’ve enjoyed this post, leave me a comment. Do you invest in anything? Are you thinking about it?

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