what is a dividend?

a simple explanation + 4 tips 

As with any part of investing, you should first understand what it is you’re investing in. We’ll focus on investing in anything that pays out dividends.

Generally speaking, a dividend is a distribution of a portion of a company’s earnings paid to the shareholders. It can provide income and growth for long-term investments.

What is a Dividend?

The simple answer is to attract more investors. By paying a dividend, they attract investors creating more demand for their stock.

Why Companies Pay Dividends

The biggest reason is it hurts their bottom line. Usually, companies just starting up, are more mindful of their cash flow.

Why Companies Don’t Pay Dividends

The company will automatically pay to your brokerage account at distribution time by buying a stock or mutual fund that pays out dividends.

How Do You Earn A Dividend?

For the company, by giving part of their profits to shareholders, they won’t be taxed on that money. For shareholders, there can also be a tax break.

Dividend Tax Benefits