Dividends are a company’s profits paid to investors who own the company’s stock! Dividends are issued on a quarterly basis, or every 3 months, often through cash or additional stock. Popular dividend companies include: Apple, Microsoft, AT&T and even some ETFs, like $VOO and $SPY.
Dividends offer an alternative to “Buying Low, and Selling High”, since they allow investors to get some money without having to sell the stock.
Investors receive the dividend payment as long as the stock is still in their portfolio before the ex-dividend date!
What is the dividend yield?
The dividend yield is the percentage of profit you get, for every share owned. For example, if Apple was worth $100 and its dividend yield was 1%, then every quarter an investor holding the stock would get $1.
Common shareholders of dividend-paying companies are eligible to receive a distribution as long as they own the stock 1 business day before the ex-dividend date, when the dividend payments are issued.
Logistics of Dividends
Share holders must approve the dividend %. Cash dividends are the most common (quarterly payments of $), but some companies may offer payment through additional stock.
On Bloom, you’ll find cash dividend payments in your buying power, and stock payments in your stock portfolio.
Where does dividend money come from?
Because dividends often rely on profits, more established, reliable companies offer dividends whereas growing, emerging companies do not.
Note: Even when they don't generate enough earnings to continue their proven track record of payouts, companies may still pay dividends.
The board of directors can choose to issue dividends over various time frames. The most common is quarterly, but some companies set their dividend rate to annually.
Popular Dividend Stocks & ETFs
- Apple ($AAPL)
- Microsoft ($MSFT)
- AT&T ($T)
- Vanguard S&P 500 ETF ($VOO)
- S&P 500 ETF ($SPY)
The dates below determine when investors are eligible to receive the dividend payments. It’s good to know how and when your money will arrive!
- Declaration/Announcement Date: When the dividend is announced.
- Ex-dividend date: The deadline for stock ownership for the dividend. So, if a ex-dividend date is the Jan 2nd, investors must own the stock before Jan 2nd (meaning the last day an investor could purchase the stock for the dividend is Jan 1st).
- Record date: The cutoff date for selling the stock. You must purchase before the dividend date, and you cannot sell until after the record date.
- Payment date: When the money is credited to the investors’ accounts.
Why Do Companies Pay Dividends?
Dividend payments typically originate from the company’s profits as a thank you and as an incentive for investors to hold stock.
Why Are Dividends Important?
Dividends give investors a passive way to make money. Great for recurring revenue! Dividends also signal a company’s ability to generate profits and stable cash flow. Dividend payments also reveal a company’s true value.