What does Dividend mean?

A dividend is a cash payment a company shares with its shareholders out of its profits, usually paid quarterly.

Some companies share their profits with shareholders as cash payments called dividends, usually quarterly. Not all stocks pay dividends — many growth companies reinvest profits instead. Dividend yield = annual dividend ÷ share price.

Dividend example

A stock trading at $80 that pays $0.60 a quarter pays $2.40 a year — a dividend yield of 3%. Own 100 shares and you receive $240 a year in cash, before tax.

Common beginner mistake

Chasing the highest yield. A 12% yield often means the price has collapsed because investors expect the dividend to be cut.