What is Dividend?
A dividend is a portion of a company's earnings distributed to shareholders, usually quarterly, as cash payment or additional shares. Dividend yield is the annual dividend divided by the stock price.
Dividend Explained
Dividends provide income regardless of stock price movement. Companies with consistent dividend histories (dividend aristocrats) are favored by income-focused investors. Important dates: ex-dividend date (must own before this date to receive dividend), record date, and payment date. Stock prices typically drop by the dividend amount on the ex-dividend date.
Real-World Example
Coca-Cola (KO) pays an annual dividend of $1.84 per share. With the stock at $60, the dividend yield is 3.07%. If you own 1,000 shares, you receive $1,840 per year in dividend income, typically paid in quarterly installments of $460.
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