When you begin learning about important topics related to investing, a term you will come across is dividend. We’ll break it down for you.
Definition:
They are payments a company makes to share profits with its stockholders. Dividends can be paid on a regular basis and is one way for investors to earn a return from investing in stocks.
Owning dividends can protect investors in a high-inflation environment.
Why buy dividend stocks?
Stocks that pay dividends can be a stable and growing income stream. Dividends are seen as an indicator that a company is doing well. Examples include Apple, Target, and Exxon.
Dividends are one way that you can make money from stocks.
Options
Dividends ETFs or Mutual Funds.
5 Types of Dividends
- Cash dividends: is the most common type. Companies pay these in cash directly into shareholder’s brokerage accounts.
- Stock dividends: Companies can pay investors additional shares of stocks.
- Dividend Reinvestment Programs (DRIPs): Able to reinvest any dividends received back into company stock, normally at a discount.
- Special dividends: payout on all shares of a company’s common stock, but don’t recur like regular dividends.
- Preferred dividends: payouts issued to owners of preferred stock and functions more like a bond.
Source: NerdWallet