Dividend

A dividend is a distribution of a portion of a company's earnings to its shareholders. When a company earns profits, it can either reinvest that money back into the business or distribute some of it to shareholders as dividends. Dividends represent one of the two main ways investors make money from stocks, the other being capital appreciation. Most dividend-paying companies distribute dividends on a quarterly basis, though some pay monthly, semi-annually, or annually. The amount is typically expressed as a dollar amount per share or as a dividend yield, which is the annual dividend divided by the stock price. For example, a stock trading at $100 with a $4 annual dividend has a 4% yield. The decision to pay dividends rests with a company's board of directors. Companies with stable, predictable earnings - like utilities, consumer staples, and established technology firms - often pay consistent or growing dividends. Rapidly growing companies typically pay little or no dividends, preferring to reinvest all profits to fuel expansion. Important dividend dates include the declaration date (when the dividend is announced), the record date (when you must be a shareholder to receive the dividend), and the payment date (when the dividend is actually paid). The ex-dividend date is typically one business day before the record date; if you buy shares on or after this date, you won't receive the upcoming dividend. Dividend investing is popular among income-focused investors, particularly retirees who need regular cash flow. Reinvesting dividends can significantly boost long-term returns through the power of compounding. Historically, dividends have contributed about 40% of the total return of the S&P 500. Companies that consistently grow their dividends over many years are called "Dividend Aristocrats." These are often high-quality businesses with durable competitive advantages and disciplined capital allocation. Dividend growth investing focuses on these companies for their combination of income and growth potential.