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. Today, 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.

What is a Dividend?

Companies That Pay Dividends

Many of the companies that pay out dividends are long-standing, well-established companies. As a result, they will pay out dividends to continually attract investors.

By paying a dividend, they attract investors creating more demand for their stock.

Why Companies Pay Dividends

Usually, companies just starting up, are more mindful of their cash flow. Others will argue that dividend payments don’t attract retired investors.

Why Companies Don’t Pay Dividends

The payment date typically comes later. The seller will get the dividend if you buy the stock after the ex-dividend date but before the payment date.

How Do You Earn A Dividend?