Investing 101: What is a dividend?

What is a dividend? This blog post explains.

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.


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.


Dividends ETFs or Mutual Funds.

5 Types of Dividends
  1. Cash dividends: is the most common type. Companies pay these in cash directly into shareholder’s brokerage accounts.
  2. Stock dividends: Companies can pay investors additional shares of stocks.
  3. Dividend Reinvestment Programs (DRIPs): Able to reinvest any dividends received back into company stock, normally at a discount.
  4. Special dividends: payout on all shares of a company’s common stock, but don’t recur like regular dividends.
  5. Preferred dividends: payouts issued to owners of preferred stock and functions more like a bond.

Source: NerdWallet

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