What Is a Dividend?
A dividend is cash a company pays to its shareholders, usually from its profit. If you own the stock, you get a share of that cash.
How a dividend works
Say a company pays $1 per share each year, and you own 100 shares. You get $100 a year, often split into four payments. The money lands in your brokerage account. Many people set it to buy more shares automatically.
Who gets the dividend?
You must own the stock before a date called the ex-dividend date. Buy on or after that day and the next payment goes to the seller instead.
Is a dividend free money?
No. When a company pays out cash, it has that much less money inside the business. On the payment day, the share price usually drops by about the size of the dividend. You still gain, because a steady dividend shows the business makes real cash.
Why do some companies not pay dividends?
Fast-growing companies often keep all their profit to grow faster. If they can earn more by reinvesting, owners may be better off without a dividend. Mature companies with steady free cash flow pay dividends more often.
How to compare dividends
Look at the dividend yield. It turns the yearly dividend into a percentage of the share price, so you can compare companies of any size.
See it in real companies
Open a company to see what it sells and how it makes money.