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+ "page_name": "Dividend - Wikipedia",
+ "page_url": "https://en.wikipedia.org/wiki/Dividend",
+ "page_snippet": "A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders.When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash (usually by bank transfer) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets. The dividend received by a shareholder is income of the shareholder and may be subject to income tax (see dividend tax). The tax treatment of this income varies considerably between jurisdictions. The corporation does not receive a tax deduction for the dividends it pays. A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding. Dividends can provide at least temporarily stable income and raise morale among shareholders, but are not guaranteed to continue. For the joint-stock company, paying dividends is not an expense; rather, it is the division of after-tax profits among shareholders.",
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A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility.[1] When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash (usually by bank transfer) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets.\n
The dividend received by a shareholder is income of the shareholder and may be subject to income tax (see dividend tax). The tax treatment of this income varies considerably between jurisdictions. The corporation does not receive a tax deduction for the dividends it pays.[2]\n
A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding. Dividends can provide at least temporarily stable income and raise morale among shareholders, but are not guaranteed to continue. For the joint-stock company, paying dividends is not an expense; rather, it is the division of after-tax profits among shareholders. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholders' equity section on the company's balance sheet – the same as its issued share capital. Public companies usually pay dividends on a fixed schedule, but may cancel a scheduled dividend, or declare an unscheduled dividend at any time, sometimes called a special dividend to distinguish it from the regular dividends. (more usually a special dividend is paid at the same time as the regular dividend, but for a one-off higher amount). Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense.\n
The usually fixed payments to holders of preference shares (or preferred stock in American English) are classed as dividends. The word dividend comes from the Latin word dividendum (\"thing to be divided\").[3]\n
In the financial history of the world, the Dutch East India Company (VOC) was the first recorded (public) company ever to pay regular dividends.[4][5] The VOC paid annual dividends worth around 18 percent of the value of the shares for almost 200 years of existence (1602\u20131800).[6]\n
In common-law jurisdictions, courts have typically refused to intervene in companies' dividend policies, giving directors wide discretion as to the declaration or payment of dividends. The principle of non-interference was established in the Canadian case of Burland v Earle (1902), the British case of Bond v Barrow Haematite Steel Co (1902), and the Australian case of Miles v Sydney Meat-Preserving Co Ltd (1912). However in Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd (2013) the Supreme Court of New South Wales broke with this precedent and recognised a shareholder's contractual right to a dividend.[7]\n
Cash dividends are the most common form of payment and are paid out in currency, usually via electronic funds transfer or a printed paper check. Such dividends are a form of investment income of the shareholder, usually treated as earned in the year they are paid (and not necessarily in the year a dividend was declared). For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is 50 cents per share, the holder of the stock will be paid $50. Dividends paid are not classified as an expense, but rather a deduction of retained earnings. Dividends paid does not appear on an income statement, but does appear on the balance sheet.\n
Different classes of stocks have different priorities when it comes to dividend payments. Preferred stocks have priority claims on a company's income. A company must pay dividends on its preferred shares before distributing income to common share shareholders. \n
Stock or scrip dividends are those paid out in the form of additional shares of the issuing corporation, or another corporation (such as its subsidiary corporation). They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield 5 extra shares).\n
Nothing tangible will be gained if the stock is split because the total number of shares increases, lowering the price of each share, without changing the market capitalization, or total value, of the shares held. (See also Stock dilution.)\n
Stock dividend distributions do not affect the market capitalization of a company.[8][9] Stock dividends are not includable in the gross income of the shareholder for US income tax purposes. Because the shares are issued for proceeds equal to the pre-existing market price of the shares; there is no negative dilution in the amount recoverable.[10][11]\n
Property dividends or dividends in specie (Latin for \"in kind\") are those paid out in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation. They are relatively rare and most frequently are securities of other companies owned by the issuer, however, they can take other forms, such as products and services.\n
Interim dividends are dividend payments made before a company's Annual General Meeting (AGM) and final financial statements. This declared dividend usually accompanies the company's interim financial statements.\n
Other dividends can be used in structured finance. Financial assets with known market value can be distributed as dividends; warrants are sometimes distributed in this way. For large companies with subsidiaries, dividends can take the form of shares in a subsidiary company. A common technique for \"spinning off\" a company from its parent is to distribute shares in the new company to the old company's shareholders. The new shares can then be traded independently.[citation needed]\n
Most often, the payout ratio is calculated based on dividends per share and earnings per share:[12]\n
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Payout ratio = dividends per share/earnings per share \u00d7 100
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A payout ratio greater than 100 means the company is paying out more in dividends for the year than it earned.\n
Dividends are paid in cash. On the other hand, earnings are an accountancy measure and do not represent the actual cash-flow of a company. Hence, a more liquidity-driven way to determine the dividend's safety is to replace earnings by free cash flow. The free cash flow represents the company's available cash based on its operating business after investments:\n
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Payout ratio = dividends per share/free cash flow per share \u00d7 100
A dividend that is declared must be approved by a company's board of directors before it is paid. For public companies in the US, four dates are relevant regarding dividends:[13] The position in the UK is very similar, except that the expression \"in-dividend date\" is not used.\n
Declaration date \u2013 the day the board of directors announces its intention to pay a dividend. On that day, a liability is created and the company records that liability on its books; it now owes the money to the shareholders.\n
In-dividend date \u2013 the last day, which is one trading day before the ex-dividend date, where shares are said to be cum dividend ('with [including] dividend'). That is, existing shareholders and anyone who buys the shares on this day will receive the dividend, and any shareholders who have sold the shares lose their right to the dividend. After this date the shares becomes ex dividend.\n
Ex-dividend date \u2013 the day on which shares bought and sold no longer come attached with the right to be paid the most recently declared dividend. In the United States and many European countries, it is typically one trading day before the record date. This is an important date for any company that has many shareholders, including those that trade on exchanges, to enable reconciliation of who is entitled to be paid the dividend. Existing shareholders will receive the dividend even if they sell the shares on or after that date, whereas anyone who bought the shares will not receive the dividend. It is relatively common for a share's price to decrease on the ex-dividend date by an amount roughly equal to the dividend being paid, which reflects the decrease in the company's assets resulting from the payment of the dividend.\n
Book closure date \u2013 when a company announces a dividend, it will also announce the date on which the company will temporarily close its books for share transfers, which is also usually the record date.\n
Record date \u2013 shareholders registered in the company's record as of the record date will be paid the dividend, while shareholders who are not registered as of this date will not receive the dividend. Registration in most countries is essentially automatic for shares purchased before the ex-dividend date.\n
Payment date \u2013 the day on which dividend cheques will actually be mailed to shareholders or the dividend amount credited to their bank account.\n
\nTypical dividend frequencies for different countries shown in a dividend calendar \n
The dividend frequency is the number of dividend payments within a single business year.[14] The most usual dividend frequencies are yearly, semi-annually, quarterly and monthly. Some common dividend frequencies are quarterly in the US, semi-annually in Japan, UK and Australia and annually in Germany.\n
Some companies have dividend reinvestment plans, or DRIPs, not to be confused with scrips. DRIPs allow shareholders to use dividends to systematically buy small amounts of stock, usually with no commission and sometimes at a slight discount. In some cases, the shareholder might not need to pay taxes on these re-invested dividends, but in most cases they do. Utilizing a DRIP is a powerful investment tool because it takes advantage of both dollar cost averaging and compounding. Dollar cost averaging is the principle of investing a set amount of capital at recurring intervals. In this case, if the dividend is paid quarterly, then every quarter you are investing a set amount (the number of shares you own multiplied by the dividend per share). By doing this, you buy more shares when the price is low and less when the price is high. Additionally, the fractional shares that are purchased then begin paying dividends, compounding your investment and increasing the number of shares and total dividend earned each time a dividend distribution is made. \n
Governments may adopt policies on dividend distribution for the protection of shareholders and the preservation of company viability, as well as treating dividends as a potential source of revenue.[15]\n
Most countries impose a corporate tax on the profits made by a company. Many jurisdictions also impose a tax on dividends paid by a company to its shareholders (stockholders), but the tax treatment of a dividend income varies considerably between jurisdictions. The primary tax liability is that of the shareholder, although a tax obligation may also be imposed on the corporation in the form of a withholding tax. In some cases, the withholding tax may be the extent of the tax liability in relation to the dividend. A dividend tax is in addition to any tax imposed directly on the corporation on its profits.[16]\n
A dividend paid by a company is not an expense of the company.\n
Australia and New Zealand have a dividend imputation system, wherein companies can attach franking credits or imputation credits to dividends. These franking credits represent the tax paid by the company upon its pre-tax profits. One dollar of company tax paid generates one franking credit. Companies can attach any proportion of franking up to a maximum amount that is calculated from the prevailing company tax rate: for each dollar of dividend paid, the maximum level of franking is the company tax rate divided by (1 − company tax rate). At the current 30% rate, this works out at 0.30 of a credit per 70 cents of dividend, or 42.857 cents per dollar of dividend. The shareholders who are able to use them, apply these credits against their income tax bills at a rate of a dollar per credit, thereby effectively eliminating the double taxation of company profits.\n
In India, a company declaring or distributing dividends is required to pay a Corporate Dividend Tax in addition to the tax levied on their income. The dividend received by the shareholders is then exempt in their hands. Dividend-paying firms in India fell from 24 percent in 2001 to almost 19 percent in 2009 before rising to 19 percent in 2010.[17] However, dividend income over and above \u20b91,000,000 attracts 10 percent dividend tax in the hands of the shareholder with effect from April 2016.[18] Since the Budget 2020\u20132021, DDT has been abolished. Now, the Indian government taxes dividend income in the hands of investor according to income tax slab rates.\n
The United States and Canada impose a lower tax rate on dividend income than ordinary income, on the assertion that company profits had already been taxed as corporate tax.\n
The rules in Part 23 of the Companies Act 2006 (sections 829-853) govern the payment of dividends to shareholders. The Act refers in this section to \"distribution\", covering any kind of distribution of a company's assets to its members (with some exceptions), \"whether in cash or otherwise\". A company is only able to make a distribution out of its accumulated, realised profits, \"so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made\".[19]\n
The United Kingdom government announced in 2018 that it was considering a review of the existing rules on dividend distribution following a consultation exercise on insolvency and corporate governance. The aim was to address concerns which had emerged where companies in financial distress were still able to distribute \"significant dividends\" to their shareholders.[15] A requirement has been proposed under which the largest companies would be required to publish a distribution policy statement covering dividend distribution.[20]\n
The law in England and Wales regarding dividend payment was clarified in 2018 by the England and Wales Court of Appeal in the case of Global Corporate Ltd v Hale [2018] EWCA Civ 2618. Certain payments made to a director/shareholder had been treated by the High Court as quantum meruit payments to Hale in his capacity as a company director but the Appeal Court reversed this judgment and treated the payments as dividends. At the time of payment they had been treated as \"dividends\" payable from an anticipated profit. The company subsequently went into liquidation; an attempt to recharacterise the payments as payments for services rendered was held to be unlawful.[21]\n
After a stock goes ex-dividend (when a dividend has just been paid, so there is no anticipation of another imminent dividend payment), the stock price should drop.\n
To calculate the amount of the drop, the traditional method is to view the financial effects of the dividend from the perspective of the company. Since the company has paid say \u00a3x in dividends per share out of its cash account on the left hand side of the balance sheet, the equity account on the right side should decrease an equivalent amount. This means that a \u00a3x dividend should result in a \u00a3x drop in the share price.\n
A more accurate method of calculating the fall in price is to look at the share price and dividend from the after-tax perspective of a shareholder. The after-tax drop in the share price (or capital gain/loss) should be equivalent to the after-tax dividend. For example, if the tax of capital gains Tcg is 35%, and the tax on dividends Td is 15%, then a \u00a31 dividend is equivalent to \u00a30.85 of after-tax money. To get the same financial benefit from a capital loss, the after-tax capital loss value should equal \u00a30.85. The pre-tax capital loss would be \u00a30.85/1 \u2212 Tcg = \u00a30.85/1 \u2212 0.35 = \u00a30.85/0.65 = \u00a31.31. In this case, a dividend of \u00a31 has led to a larger drop in the share price of \u00a31.31, because the tax rate on capital losses is higher than the dividend tax rate. However in many countries the stock market is dominated by institutions which pay no additional tax on dividends received (as opposed to tax on overall profits). If that is the case, then the share price should fall by the full amount of the dividend.\n
Finally, security analysis that does not take dividends into account may mute the decline in share price, for example in the case of a price\u2013earnings ratio target that does not back out cash; or amplify the decline when comparing different periods.\n
The effect of a dividend payment on share price is an important reason why it can sometimes be desirable to exercise an American option early.\n
Some[who?] believe company profits are best re-invested in the company with actions such as research and development, capital investment or expansion. Proponents of this view (and thus critics of dividends per se) suggest that an eagerness to return profits to shareholders may indicate the management having run out of good ideas for the future of the company. A counter-argument to this position came from Peter Lynch of Fidelity investments, who declared: \"One strong argument in favor of companies that pay dividends is that companies that don\u2019t pay dividends have a sorry history of blowing the money on a string of stupid diworseifications\";[22] using his self-created term for diversification that results in worse effects, not better. Additionally, studies have demonstrated that companies that pay dividends have higher earnings growth, suggesting dividend payments may be evidence of confidence in earnings growth and sufficient profitability to fund future expansion.[23]Benjamin Graham and David Dodd wrote in Securities Analysis (1934): \"The prime purpose of a business corporation is to pay dividends to its owners. A successful company is one that can pay dividends regularly and presumably increase the rate as time goes on.\"[24]\n
Other studies indicate that divided-paying stocks tend to offer superior long-term performance relative to the overall market at least in developed economies,[25][26] relative to a stock index such as the S&P 500[27][28] or Dow Jones Industrial Average[29] or relative to stocks that do not pay dividends.[28][30] Several explanations have been proposed for this outperformance such as dividends being associated with value stocks which are themselves associated with long-term outperformance;[31] being more durable in crashes or bear markets;[32][33] being associated with profitable companies exhibiting high levels of free cashflow; and being associated with mature, unfashionable companies that are overlooked by many investors and thus an effective contrarian strategy.[34][35] Assett managers at Tweedy, Browne[36] and Capital Group[37] have suggested dividends are an effective measure of a given company's overall financial status.\n
Shareholders in companies that pay little or no cash dividends can potentially reap the benefit of the company's profits when they sell their shareholding, or when a company is wound down and all assets liquidated and distributed amongst shareholders. However, data from professor Jeremy Siegel found stocks that do not pay dividends tend to have worse long-term performance, as a group, than the general stock market and also perform worse than dividend-paying stocks.[35]\n
Taxation of dividends is often used as justification for retaining earnings, or for performing a stock buyback, in which the company buys back stock, thereby increasing the value of the stock left outstanding.\n
When dividends are paid, individual shareholders in many countries suffer from double taxation of those dividends:\n
\n
the company pays income tax to the government when it earns any income, and then
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when the dividend is paid, the individual shareholder pays income tax on the dividend payment.
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In many countries, the tax rate on dividend income is lower than for other forms of income to compensate for tax paid at the corporate level.\n
A capital gain should not be confused with a dividend. Generally, a capital gain occurs where a capital asset is sold for an amount greater than the amount of its cost at the time the investment was purchased. A dividend is a parsing out a share of the profits, and is taxed at the dividend tax rate. If there is an increase of value of stock, and a shareholder chooses to sell the stock, the shareholder will pay a tax on capital gains (often taxed at a lower rate than ordinary income). If a holder of the stock chooses to not participate in the buyback, the price of the holder's shares could rise (as well as it could fall), but the tax on these gains is delayed until the sale of the shares.\n
Certain types of specialized investment companies (such as a REIT in the U.S.) allow the shareholder to partially or fully avoid double taxation of dividends.\n
Cooperative businesses may retain their earnings, or distribute part or all of them as dividends to their members. They distribute their dividends in proportion to their members' activity, instead of the value of members' shareholding. Therefore, co-op dividends are often treated as pre-tax expenses. In other words, local tax or accounting rules may treat a dividend as a form of customer rebate or a staff bonus to be deducted from turnover before profit (tax profit or operating profit) is calculated.\n
Consumers' cooperatives allocate dividends according to their members' trade with the co-op. For example, a credit union will pay a dividend to represent interest on a saver's deposit. A retail co-op store chain may return a percentage of a member's purchases from the co-op, in the form of cash, store credit, or equity. This type of dividend is sometimes known as a patronage dividend or patronage refund, as well as being informally named divi or divvy.[38][39][40]\n
Producer cooperatives, such as worker cooperatives, allocate dividends according to their members' contribution, such as the hours they worked or their salary.[41]\n
In real estate investment trusts and royalty trusts, the distributions paid often will be consistently greater than the company earnings. This can be sustainable because the accounting earnings do not recognize any increasing value of real estate holdings and resource reserves. If there is no economic increase in the value of the company's assets then the excess distribution (or dividend) will be a return of capital and the book value of the company will have shrunk by an equal amount. This may result in capital gains which may be taxed differently from dividends representing distribution of earnings.\n
In the case of mutual insurance, for example, in the United States, a distribution of profits to holders of participating life policies is called a dividend.\nThese profits are generated by the investment returns of the insurer's general account, in which premiums are invested and from which claims are paid.[42] The participating dividend may be used to decrease premiums, or to increase the cash value of the policy.[43]\nSome life policies pay nonparticipating dividends.\nAs a contrasting example, in the United Kingdom, the surrender value of a with-profits policy is increased by a bonus, which also serves the purpose of distributing profits.\nLife insurance dividends and bonuses, while typical of mutual insurance, are also paid by some joint stock insurers.\n
Insurance dividend payments are not restricted to life policies. For example, general insurer State Farm Mutual Automobile Insurance Company can distribute dividends to its vehicle insurance policyholders.[44]\n
^O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 273. ISBN978-0-13-063085-8.\n
^Levis, Mario (September 1, 1989). \"Stock market anomalies: A re-assessment based on the UK evidence\". Journal of Banking & Finance. 13 (4): 675\u2013696. doi:10.1016/0378-4266(89)90037-X.\n
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^Siegel (2005) found ranking stocks within the S&P 500 by dividend yield rather than market capitalization, and rebalancing annually, led to long-term outperformance of the overall index by over 2% a year, and even greater outperformance relative to the non-dividend stocks within the S&P 500.\n
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^ abP.N. Patel, et al., High Yield, Low Payout. Credit Suisse Quantitative Research, August 2006.\n
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^Cai, Renjie. Which one is better: Investing in High Dividend or Low Dividend stocks?. Diss. University of Nevada, Reno, 2014.\n
^\"Dividend yield is also commonly associated with style investing, with growth stocks characterized as having low dividend yields and value stocks as having high dividend yields. Studies have found that value stocks outperform growth stocks in the long run.\" Conover, C. Mitchell, Gerald R. Jensen, and Marc W. Simpson. \"What difference do dividends make?.\" Financial Analysts Journal 72.6 (2016): 28-40.\n
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^\"Dividend-paying stocks outperform non-dividend-paying stocks by 1 to 2% more per month in declining markets than in advancing markets. These results are economically and statistically significant and robust to many risk adjustments and across industries.\" Kathleen P. Fuller, Michael A. Goldstein. Do dividends matter more in declining markets? Journal of Corporate Finance, Volume 17, Issue 3. 2011, Pages 457-473, ISSN 0929-1199, https://doi.org/10.1016/j.jcorpfin.2011.01.001\n
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^\"In the wipeout of 1987, the high-dividend payers fared better than the nondividend payers and suffered less than half the decline of the general market.\" Peter Lynch and John Rothschild (1989) One Up on Wall Street: How To Use What You Already Know To Make Money In The Market Simon & Schuster, ISBN 0671661035; Chapter 13.\n
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^David Dreman (1998). Contrarian Investment Strategies: The Next Generation. Free Press, ISBN 0684813505\n
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^ abJeremy Siegel (2005. The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New. Currency, ISBN 140008198X\n
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^In a 2007 report, revised 2014, Tweedy, Browne wrote: \"The ability to pay cash dividends is a positive factor in assessing the underlying health of a company and the quality of its earnings. This is particularly pertinent in light of the complexity of corporate accounting and numerous examples of \u201cearnings management,\u201d including occasionally fraudulent earnings manipulation.\"\n
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^In a 2024 interview, Jody Johnsson of Capital Group stated: \"... I think dividends are a very important signal of financial health and of management discipline. How management thinks about the dividend and how they think about the need to generate consistent cash flow in order to pay it is very important.\" \n
^\"What Are Dividends?\". New York Life. Archived from the original on May 11, 2008. Retrieved April 29, 2008. In short, the portion of the premium determined not to have been necessary to provide coverage and benefits, to meet expenses, and to maintain the company's financial position, is returned to policyowners in the form of dividends.\n
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+ "page_last_modified": " Sun, 25 Feb 2024 20:41:24 GMT"
+ },
+ {
+ "page_name": "How and When Are Stock Dividends Paid Out?",
+ "page_url": "https://www.investopedia.com/ask/answers/102714/how-and-when-are-stock-dividends-paid-out.asp",
+ "page_snippet": "A dividend is usually declared quarterly after a company finalizes its income statement and dividends are paid either by check or in additional shares of stock.If a company enjoys a profit and decides to pay a dividend to common shareholders, then it declares the dividend, the amount, and the date when it will be paid out to the shareholders. Usually, dividend amounts and related dates are determined on a quarterly basis, after a company finalizes its income statement and the board of directors meets to review the company's financials. Some companies with solid histories of paying dividends have established quarterly dividend payment dates. For example, IBM usually pays its dividends on the 10th of March, June, September, and December. A dividend is a payment of some of a company's earnings to a class of its shareholders.",
+ "page_result": "\n\t\t\t\t\n\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t \n \n \n\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\nHow and When Are Stock Dividends Paid Out?\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\n\n\t\t\n\n\n\n\n\n\n\n
\nBrian Beers is a digital editor, writer, Emmy-nominated producer, and content expert with 15+ years of experience writing about corporate finance & accounting, fundamental analysis, and investing.\n
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Updated February 12, 2024
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\nIf a company enjoys a profit and decides to pay a dividend to common shareholders, then it declares the dividend, the amount, and the date when it will be paid out to the shareholders.\n
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\nUsually, dividend amounts and related dates are determined on a quarterly basis, after a company finalizes its income statement and the board of directors meets to review the company's financials.\n
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\nSome companies with solid histories of paying dividends have established quarterly dividend payment dates. For example, IBM usually pays its dividends on the 10th of March, June, September, and December.\n
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\nKey Takeaways
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A dividend is a payment of some of a company's earnings to a class of its shareholders.
The payment date and amount are determined on a quarterly basis once the board of directors reviews a company's financials.
You must buy shares before the ex-date to receive the declared dividend.
The record date is the day on which you must be on the company\u2019s books as a shareholder to receive the declared dividend.
The payment date is the day the company pays the declared dividend to shareholders who own the stock before the ex-date.
\n
\n
\n
Key Dividend Dates
\n
\nIf a dividend is declared, all qualified shareholders of the company are notified via a press release. The information is usually reported through\u00a0major stock quoting services for easy reference. The key dividend dates that an investor should be aware of are:\n
\n\n
\n
The declaration date: The date that the dividend is declared and the dividend amount, ex-date, record date, and payment date are set.
\n
The ex-dividend date: The date (aka ex-date) before which an investor must have purchased the stock to receive the upcoming dividend. On this day, the stock begins trading ex-dividend (or, without the dividend).
\n
The record date: The date that determines all shareholders of record who are entitled to the dividend payment. This date usually occurs two days after the ex-date.
\n
The payment date: This is the day dividend payments are issued to shareholders and is usually about one month after the record date.
\n
\n\n
How Dividends Are Paid
\n
\nA dividend is the distribution of some of a company's earnings as cash to a class of its shareholders. Dividends typically are credited to a brokerage account or paid in the form of a dividend check. The dividend\u00a0check is mailed to stockholders but can be direct-deposited to a shareholder's account of choice, if preferred.\n
\n\n
\nThe alternative to cash dividends is additional shares of stock. This is known as dividend reinvestment. Dividend reinvestment plans (DRIPs) are commonly offered by individual companies and mutual funds.\n
\n\n
\n
\n\n
\n
Once a dividend is announced on the declaration date, the company has a legal responsibility to pay it.
\n
\n
\n
When Dividends Are Paid
\n
\nOn the payment date, the company deposits the funds for disbursement to shareholders with the Depository Trust Company (DTC). Cash payments are then disbursed by the DTC to brokerage firms around the world where shareholders have accounts that hold the company's shares. The recipient firms appropriately apply cash dividends to client accounts, or process reinvestment transactions, as per a client's instructions.\n
\n\n
\nMailed checks should be received within a few days of the payment date.\n
\n\n
Dividend Reinvestment Plan (DRIP)
\n
\nA dividend reinvestment plan (DRIP) offers a number of advantages to investors. If the investor prefers to build their current equity holdings using funds from dividend payments, automatic dividend reinvestment simplifies this process (as compared to receiving the dividend payment in cash and then using the cash to purchase additional shares).\n
\n\n
\nCompany-operated DRIPs are usually commission-free, since they bypass a broker. This feature is particularly appealing to small investors since commission fees are proportionately larger for smaller purchases of stock.\n
\n\n
\nAnother potential benefit of DRIPs is that some companies offer stockholders the option to purchase additional shares in cash at a discount. With a discount from 1% to 10%, plus the added benefit of not paying commission fees, investors can acquire additional stock holdings at an advantageous cost (compared to buying shares in cash through a brokerage firm).\n
\nSpecific tax implications for the dividend payments vary depending on the type of dividend declared, account type in which the shareholder owns the shares, and how long the shareholder has owned the shares. Dividend payments are summarized for each tax year on Form 1099-DIV.\n
\n\n
\n\n
What Is a Dividend?
\n
A dividend is a payment that a company chooses to make to shareholders when the company has a profit. Companies can either reinvest their earnings in themselves or share some (or all) with its investors. Dividends represent income for investors and are the primary goal for many.
\n
\n\n
\n\n
Are Dividends a Return on Investment?
\n
Yes, dividends are considered a part of what's referred to as total return, which is income produced by an investment (e.g., dividends, interest) plus the appreciation of the investment's price.
\n
\n\n
\n\n
Why Is the Ex-Dividend Date Important to Know?
\n
Investors who wish to buy shares in companies in order to receive a recently announced dividend payment have until the day before the ex-dividend date (or ex-date) to make their purchase. If they buy on or after the ex-date, they won't be on the company's records as a shareholder in time to receive the upcoming dividend.
\n
\n\n
The Bottom Line
\n
\nDividends are a way for companies to distribute profits to their shareholders, but not all companies pay dividends. Some companies may decide to retain their earnings to re-invest for growth opportunities instead.\n
\n\n
\nIf dividends are to be paid, a company will declare the amount of the dividend and all relevant dates. Then, all holders of the stock (by the ex-date) will be paid accordingly on the upcoming payment date. Investors who receive dividends can choose to take them as cash or as additional shares.\n
\n
\n\n
\n\n
\n
\n
\n
\n
\n
\n
\n
\nArticle Sources
\n
\n\n\n
\n
\n
\n
\n
\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our\neditorial policy.\n
\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
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\n
\n
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\n
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\n×
\n
\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
\nPayment Date for Dividends: Overview, Key Dates, and Examples\n
\nThe payment date is the date set by a company when it will issue payment on the stock's dividend.
\nmore\n
\n
\n
\n
\nWhat Does Ex-Dividend Mean, and What Are the Key Dates?\n
\nEx-dividend is a classification in stock trading that indicates when a declared dividend belongs to the seller rather than the buyer.
\nmore\n
\n
\n
\n
\nEx-Dividend Date: Definition, Key Dates, and Example\n
\nThe ex-date, or ex-dividend date, is the date on or after which a security is traded without a previously declared dividend or distribution.
\nmore\n
\n
\n
\n
\nDividend Arbitrage: What It Is, How It Works, and Example\n
\nDividend arbitrage is an options trading strategy that involves purchasing puts and stock before the ex-dividend date and then exercising the put.
\nmore\n
\n
\n
\n
\nWhat Is the Record Date and Why Is It Important? Plus an Example\n
\nThe record date is the last date on which shareholders are eligible to receive a dividend or distribution. It's established by the company's board.
\nmore\n
\n
\n
\n
\nDividends: Definition in Stocks and How Payments Work\n
\nA dividend is a distribution of earnings, often quarterly, by a company to its shareholders in the form of cash or stock reinvestment.
\nmore\n
\n
\n
\n
\n
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By clicking \u201cAccept All Cookies\u201d, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
\n
\t\t\n\n\n\t\t\n\n\t\t\n",
+ "page_last_modified": ""
+ },
+ {
+ "page_name": "How and When Are Stock Dividends Paid Out?",
+ "page_url": "https://www.investopedia.com/ask/answers/102714/how-and-when-are-stock-dividends-paid-out.asp",
+ "page_snippet": "A dividend is usually declared quarterly after a company finalizes its income statement and dividends are paid either by check or in additional shares of stock.If a company enjoys a profit and decides to pay a dividend to common shareholders, then it declares the dividend, the amount, and the date when it will be paid out to the shareholders. Usually, dividend amounts and related dates are determined on a quarterly basis, after a company finalizes its income statement and the board of directors meets to review the company's financials. Some companies with solid histories of paying dividends have established quarterly dividend payment dates. For example, IBM usually pays its dividends on the 10th of March, June, September, and December. A dividend is a payment of some of a company's earnings to a class of its shareholders.",
+ "page_result": "\n\t\t\t\t\n\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t \n \n \n\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\nHow and When Are Stock Dividends Paid Out?\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\n\n\t\t\n\n\n\n\n\n\n\n
\nBrian Beers is a digital editor, writer, Emmy-nominated producer, and content expert with 15+ years of experience writing about corporate finance & accounting, fundamental analysis, and investing.\n
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Updated February 12, 2024
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\n\nReviewed by\n
\nSamantha Silberstein\n
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\n\nReviewed by\n\nSamantha Silberstein\n
\nFull Bio\n
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\nSamantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and health insurance licensed agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans.\n
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\n\nFact checked by\n\nTimothy Li\n
\nFull Bio\n
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\n \n
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\nTimothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. Timothy has helped provide CEOs and CFOs with deep-dive analytics, providing beautiful stories behind the numbers, graphs, and financial models.\n
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\n
\n
\nIf a company enjoys a profit and decides to pay a dividend to common shareholders, then it declares the dividend, the amount, and the date when it will be paid out to the shareholders.\n
\n\n
\nUsually, dividend amounts and related dates are determined on a quarterly basis, after a company finalizes its income statement and the board of directors meets to review the company's financials.\n
\n\n
\nSome companies with solid histories of paying dividends have established quarterly dividend payment dates. For example, IBM usually pays its dividends on the 10th of March, June, September, and December.\n
\n\n
\n
\n
\nKey Takeaways
\n
\n
A dividend is a payment of some of a company's earnings to a class of its shareholders.
The payment date and amount are determined on a quarterly basis once the board of directors reviews a company's financials.
You must buy shares before the ex-date to receive the declared dividend.
The record date is the day on which you must be on the company\u2019s books as a shareholder to receive the declared dividend.
The payment date is the day the company pays the declared dividend to shareholders who own the stock before the ex-date.
\n
\n
\n
Key Dividend Dates
\n
\nIf a dividend is declared, all qualified shareholders of the company are notified via a press release. The information is usually reported through\u00a0major stock quoting services for easy reference. The key dividend dates that an investor should be aware of are:\n
\n\n
\n
The declaration date: The date that the dividend is declared and the dividend amount, ex-date, record date, and payment date are set.
\n
The ex-dividend date: The date (aka ex-date) before which an investor must have purchased the stock to receive the upcoming dividend. On this day, the stock begins trading ex-dividend (or, without the dividend).
\n
The record date: The date that determines all shareholders of record who are entitled to the dividend payment. This date usually occurs two days after the ex-date.
\n
The payment date: This is the day dividend payments are issued to shareholders and is usually about one month after the record date.
\n
\n\n
How Dividends Are Paid
\n
\nA dividend is the distribution of some of a company's earnings as cash to a class of its shareholders. Dividends typically are credited to a brokerage account or paid in the form of a dividend check. The dividend\u00a0check is mailed to stockholders but can be direct-deposited to a shareholder's account of choice, if preferred.\n
\n\n
\nThe alternative to cash dividends is additional shares of stock. This is known as dividend reinvestment. Dividend reinvestment plans (DRIPs) are commonly offered by individual companies and mutual funds.\n
\n\n
\n
\n\n
\n
Once a dividend is announced on the declaration date, the company has a legal responsibility to pay it.
\n
\n
\n
When Dividends Are Paid
\n
\nOn the payment date, the company deposits the funds for disbursement to shareholders with the Depository Trust Company (DTC). Cash payments are then disbursed by the DTC to brokerage firms around the world where shareholders have accounts that hold the company's shares. The recipient firms appropriately apply cash dividends to client accounts, or process reinvestment transactions, as per a client's instructions.\n
\n\n
\nMailed checks should be received within a few days of the payment date.\n
\n\n
Dividend Reinvestment Plan (DRIP)
\n
\nA dividend reinvestment plan (DRIP) offers a number of advantages to investors. If the investor prefers to build their current equity holdings using funds from dividend payments, automatic dividend reinvestment simplifies this process (as compared to receiving the dividend payment in cash and then using the cash to purchase additional shares).\n
\n\n
\nCompany-operated DRIPs are usually commission-free, since they bypass a broker. This feature is particularly appealing to small investors since commission fees are proportionately larger for smaller purchases of stock.\n
\n\n
\nAnother potential benefit of DRIPs is that some companies offer stockholders the option to purchase additional shares in cash at a discount. With a discount from 1% to 10%, plus the added benefit of not paying commission fees, investors can acquire additional stock holdings at an advantageous cost (compared to buying shares in cash through a brokerage firm).\n
\nSpecific tax implications for the dividend payments vary depending on the type of dividend declared, account type in which the shareholder owns the shares, and how long the shareholder has owned the shares. Dividend payments are summarized for each tax year on Form 1099-DIV.\n
\n\n
\n\n
What Is a Dividend?
\n
A dividend is a payment that a company chooses to make to shareholders when the company has a profit. Companies can either reinvest their earnings in themselves or share some (or all) with its investors. Dividends represent income for investors and are the primary goal for many.
\n
\n\n
\n\n
Are Dividends a Return on Investment?
\n
Yes, dividends are considered a part of what's referred to as total return, which is income produced by an investment (e.g., dividends, interest) plus the appreciation of the investment's price.
\n
\n\n
\n\n
Why Is the Ex-Dividend Date Important to Know?
\n
Investors who wish to buy shares in companies in order to receive a recently announced dividend payment have until the day before the ex-dividend date (or ex-date) to make their purchase. If they buy on or after the ex-date, they won't be on the company's records as a shareholder in time to receive the upcoming dividend.
\n
\n\n
The Bottom Line
\n
\nDividends are a way for companies to distribute profits to their shareholders, but not all companies pay dividends. Some companies may decide to retain their earnings to re-invest for growth opportunities instead.\n
\n\n
\nIf dividends are to be paid, a company will declare the amount of the dividend and all relevant dates. Then, all holders of the stock (by the ex-date) will be paid accordingly on the upcoming payment date. Investors who receive dividends can choose to take them as cash or as additional shares.\n
\n
\n\n
\n\n
\n
\n
\n
\n
\n
\n
\n
\nArticle Sources
\n
\n\n\n
\n
\n
\n
\n
\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our\neditorial policy.\n
\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
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\n\n
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\n
\nTake the Next Step to Invest
\n
\n\n
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\n×
\n
\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
\nPayment Date for Dividends: Overview, Key Dates, and Examples\n
\nThe payment date is the date set by a company when it will issue payment on the stock's dividend.
\nmore\n
\n
\n
\n
\nWhat Does Ex-Dividend Mean, and What Are the Key Dates?\n
\nEx-dividend is a classification in stock trading that indicates when a declared dividend belongs to the seller rather than the buyer.
\nmore\n
\n
\n
\n
\nEx-Dividend Date: Definition, Key Dates, and Example\n
\nThe ex-date, or ex-dividend date, is the date on or after which a security is traded without a previously declared dividend or distribution.
\nmore\n
\n
\n
\n
\nDividend Arbitrage: What It Is, How It Works, and Example\n
\nDividend arbitrage is an options trading strategy that involves purchasing puts and stock before the ex-dividend date and then exercising the put.
\nmore\n
\n
\n
\n
\nWhat Is the Record Date and Why Is It Important? Plus an Example\n
\nThe record date is the last date on which shareholders are eligible to receive a dividend or distribution. It's established by the company's board.
\nmore\n
\n
\n
\n
\nDividends: Definition in Stocks and How Payments Work\n
\nA dividend is a distribution of earnings, often quarterly, by a company to its shareholders in the form of cash or stock reinvestment.
\nmore\n
\n
\n
\n
\n
\n\n\n\n\n
\n
By clicking \u201cAccept All Cookies\u201d, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
\n
\t\t\n\n\n\t\t\n\n\t\t\n",
+ "page_last_modified": ""
+ },
+ {
+ "page_name": "10 Best High Dividend Stocks Of February 2024 \u2013 Forbes Advisor",
+ "page_url": "https://www.forbes.com/advisor/investing/best-dividend-stocks/",
+ "page_snippet": "Dividend investing provides investors with steady cash flow over the long term. When you reinvest dividend income, the magic of compounding can turbocharge your returns. Over the last century, dividend payments accounted for about 40% of the total return of the S&P 500. The best dividend stocThese stocks have boosted annual dividend payouts for at least 10 years with attractive yields and delivered long-term price stability. The best dividend stocks give you a great hedge against inflation, as they provide both appreciation and capital gains to offset rising costs. From 1973 to 2022, S&P 500 dividend stocks delivered twice the return of stocks that paid no dividends. But here\u2019s the trouble: A good dividend cannot make up for an underperforming stock. Similarly, a high dividend yield could be a trap that covers up erratic payouts, poor performance or minimal growth prospects. To help you find reliable dividend investments, Forbes Advisor has identified 10 of the best dividend stocks available in the U.S. stock market today. These companies have boosted annual dividend payouts for at least 10 years with attractive yields, have delivered long-term price stability and have grown their earnings year after year.",
+ "page_result": "\n\n\n\t\n\t\t\n\t\t\n \t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t 10 Best High Dividend Stocks Of February 2024 – Forbes Advisor\n\n\n\n\n\n\n\n \n \n\t\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\t\n\t\n \n\n\t\t\n\t
You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website.
Cory has been a professional trader since 2005, and holds a Chartered Market Technician (CMT) designation. He has been widely published, writing for Technical Analysis of Stock & Commodities magazine, Investopedia, Benzinga, and others. He runs TradeThatSwing.com, has authored several trading courses and books, coaches individual clients, and regularly trades stocks, currencies, and ETFs.
Cory has been a professional trader since 2005, and holds a Chartered Market Technician (CMT) designation. He has been widely published, writing for Technical Analysis of Stock & Commodities magazine, Investopedia, Benzinga, and others. He runs TradeThatSwing.com, has authored several trading courses and books, coaches individual clients, and regularly trades stocks, currencies, and ETFs.
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master\u2019s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John\u2019s College.
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master\u2019s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John\u2019s College.
editor
Reviewed By
Updated: Feb 7, 2024, 5:36pm
\n
\n Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
\n
\n
Dividend investing provides investors with steady cash flow over the long term. When you reinvest dividend income, the magic of compounding can turbocharge your returns. Over the last century, dividend payments accounted for about 40% of the total return of the S&P 500.
\n
The best dividend stocks give you a great hedge against inflation, as they provide both appreciation and capital gains to offset rising costs. From 1973 to 2022, S&P 500 dividend stocks delivered twice the return of stocks that paid no dividends.
\n
But here\u2019s the trouble: A good dividend cannot make up for an underperforming stock. Similarly, a high dividend yield could be a trap that covers up erratic payouts, poor performance or minimal growth prospects.
\n
To help you find reliable dividend investments, Forbes Advisor has identified 10 of the best dividend stocks available in the U.S. stock market today. These companies have boosted annual dividend payouts for at least 10 years with attractive yields, have delivered long-term price stability and have grown their earnings year after year.
\n
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Take the SmartAsset quiz to get matched with vetted financial advisors who serve your area.
Our editors are committed to bringing you unbiased ratings and information. Our editorial content is not influenced by advertisers. We use data-driven methodologies to evaluate financial products and companies, so all are measured equally. You can read more about our editorial guidelines and the investing methodology for the ratings below.
Take the SmartAsset quiz to get matched with vetted financial advisors who serve your area
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Review matches on your schedule with a free introductory call
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10 Best Dividend Stocks To Buy Now
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Stock (ticker)
\n
Dividend Yield
\n
\n\n\n
\n
Texas Instruments Inc. (TXN)
\n
3.3%
\n
\n
\n
Air Products and Chemicals, Inc. (APD)
\n
3.3%
\n
\n
\n
Lockheed Martin Corporation (LMT)
\n
2.9%
\n
\n
\n
McDonald\u2019s Corporation (MCD)
\n
2.3%
\n
\n
\n
Automatic Data Processing, Inc. (ADP)
\n
2.2%
\n
\n
\n
Microchip Technology Incorporated (MCHP)
\n
2.0%
\n
\n
\n
Marsh & McLennan Companies, Inc. (MMC)
\n
1.5%
\n
\n
\n
UnitedHealth Group Incorporated (UNH)
\n
1.5%
\n
\n
\n
Hubbell Inc. (HUBB)
\n
1.4%
\n
\n
\n
Elevance Health, Inc. (ELV)
\n
1.3%
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\n \n
\n \n
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Texas Instruments Inc. (TXN)
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\n
\n
Dividend Yield
\n
\n
3.3%
\n
\n
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5-Year Avg. Annualized Dividend Growth
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11.0%
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5-Year Avg. Annualized EPS Growth
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4.8%
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3.3%
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11.0%
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4.8%
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Why We Picked It
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Once famous for calculators, Texas Instruments now earns most of its revenue from manufacturing semiconductors. It\u2019s the world’s largest maker of analog chips.
\n
TXN has an \u201cA\u201d grade for financial health from Morningstar. It has seen strong earnings growth, and that is expected to continue with 10% yearly Earnings Per Share (EPS) growth over the next five years. The company has steadily raised its dividend amount, averaging 11.0% yearly increases over the last five years.
\n
The stock has outpaced the S&P 500 by 5.1 percentage points per year over the last decade. For reference, the S&P 500 has averaged 11.5% yearly returns over the last decade while TXN has averaged 16.7%.
Air Products and Chemicals is an industrial gas supplier. It\u2019s one of the largest helium and hydrogen producers in the world and a leading materials stock.
\n
APD is another stock with an \u201cA\u201d financial health rating. Analysts expect the company to grow EPS by 10.3% per year over the next half decade.
\n
The stock is trading below its 52-week high and has beaten the S&P 500 by 2.5 percentage points per year over the decade.
Lockheed Martin is the largest defense contractor in the world and a leading industrial stock. The company makes fighter planes, helicopters, missiles and missile defense systems, satellites and space vehicles.
\n
LMT has an \u201cA\u201d rating for financial health and has been growing EPS at more than 20% per year. That growth is expected to slow, but it should remain at a respectable average of 10.7% per year for the next five years. More than enough growth for the company to keep paying and increasing the dividend.
\n
The stock has outpaced the S&P 500 by 4.6 percentage points per year for the last decade.
McDonald\u2019s operates fast food restaurants around the world, including both company-owned and franchised stores.
\n
MCD has an \u201cA\u201d financial health rating. Analysts expect the company to grow EPS by 9.0% per year over the next five years. That is the lowest expected growth rate on this list, but it is still above the median expected growth rate of 8.7% for S&P 500 stocks.
\n
The stock has been a great long-term performer beating the S&P 500 by an average of 2.2 percentage points per year over the last 10 years.
Automatic Data Processing provides human resources, payroll, insurance and retirement services to corporations.
\n
ADP is an all-around solidly performing stock. It has a \u201cB\u201d financial rating from Morningstar, and it\u2019s grown EPS at 16.2% per year over the last five years. Analysts expect 13.5% yearly EPS increases for the next five years. That\u2019s the highest expected growth rate on this list.
\n
The price is currently well below its 52-week high and these kinds of pullbacks have historically been good buying points in this long-term uptrending stock. It has beaten the S&P 500 by an average of 3.8 percentage points per year over the last 10 years.
Microchip Technology is a semiconductor company that makes microcontrollers and microprocessors, data converters, LED drivers, memory products, power management products and more.
\n
MCHP has a \u201cB\u201d financial health rating and the highest EPS growth rate on this list. Analysts expect 12.1% yearly EPS growth over the next five years. That\u2019s the second-highest expected growth on this list.
\n
The stock is well below its 52-week high, but it has bettered the S&P 500\u2019s returns by an average of 4.3 percentage points per year over the last decade.
Marsh & McLennan provides insurance and risk consulting and services. It operates through four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman.
\n
MMC has an \u201cA\u201d rating for financial health and has been growing EPS at more than 18% per year. That growth is expected to slow, but it should remain a respectable 11.1% per year on average for the next five years. The company has a strong history of increasing dividends and that is likely to continue.
\n
The stock has outpaced the S&P 500 by 6.1 percentage points per year for the last decade, making it the third strongest performing stock on the list.
UnitedHealth Group provides health insurance primarily within the U.S. but also globally. Its plans care for 152 million people.
\n
UNH is an all-around solid stock. It has an \u201cA\u201d financial rating from Morningstar, and analysts expect 11.9% yearly EPS increases for the next five years. That\u2019s the third-highest expected growth rate on this list.
\n
The price is currently near its 52-week high. It is the strongest performing stock on the list, outperforming the S&P 500 by an average of 13.1 percentage points per year over the last 10 years.
Hubbell is an industrial conglomerate selling everything from copper and fiber cable to audio and video cords, chargers, LED lights, fasteners and much more.
\n
HUBB is another stock with an \u201cA\u201d financial health rating. Analysts expect the company to grow EPS by 10.0% over the next five years. The dividend has been growing every year for the last decade, and that isn\u2019t currently in danger of changing.
\n
The stock is trading below its 52-week high and has beaten the S&P 500 by 1.1 percentage points per year over the last decade.
Elevance Health is a health insurer providing individual plans as well as government- and employer-sponsored plans
\n
ELV has a \u201cB\u201d grade for financial health from Morningstar. It has seen strong earnings growth of 9.3% per year over the last five years, and that is expected to continue with 11.8% yearly EPS growth over the next five years. The company has steadily raised its dividend amount, averaging 14.6% yearly increases over the last five years.
\n
The stock is the second-best performing on the list over the last decade, outperforming the S&P 500 by 8.3 percentage points per year.
*All analysis and data are sourced from Trades That Swing, current as of February 7, 2024.
\n
\n \n \n
Methodology
\n
Our curated list of best dividend stocks is based on nine key measures. To be included in the list, each stock must have demonstrated:
\n
\n
Long-term dividend increases. The company must have increased its dividend for at least 10 years in a row.
\n
Decent annual dividend growth. The annual dividend amount has increased by at least 7% on average over the last five years.
\n
Sustained earnings growth. EPS has increased more than 8% per year, on average, over the last five years.
\n
No unprofitable years. Earnings must have remained positive for at least the last six years.
\n
Elevated current dividend yield. The current dividend yield must be at least 1%.
\n
Decent overall shareholder yield. Shareholder yield must be at least 1%. Shareholder yield includes dividends and share buybacks or issuances.
\n
Expected to grow.\u00a0Analysts expect EPS to grow by at least 8% per year over the next five years.
\n
Outperforms the S&P 500. The stocks must have outperformed the S&P 500 by at least one percentage point per year, on average, over the last 10 years.
\n
Maximum drawdown. The maximum decline a stock price could have seen over the last 10 years is 50%. This helps exclude volatile stocks. More than 82% of U.S. stocks have had at least one 50% drop or greater over that time period.
\n
Minimum stock data requirements. The stocks are listed on U.S. exchanges, have a price of at least $5 and average over half a million shares per day.
\n
\n
As of this writing, only 15 U.S. stocks met all the criteria. The top 10 in terms of dividend yield were selected for this listing.
\n
Dividends are nice, but they aren\u2019t the only factor to consider when buying a stock. Ideally, a dividend stock is financially strong and growing\u2014continued stability and growth signals that the company\u2019s dividend is sustainable over the long term and likely to be increased regularly.
\n
An experienced financial analyst selected the stocks above, but they may not be right for your portfolio. Before you purchase any of these stocks, do plenty of research to ensure they align with your financial goals and risk tolerance.
\n
\n \n \n
What Are Dividend Stocks?
\n
Dividend stocks make regular distributions of cash and stock to their shareholders. Income investors who want cash flow buy dividend stocks, although the best dividend stocks deliver good long-term appreciation in addition to income.
\n
Here are the key concepts you need to understand when evaluating the best dividend stocks:
\n
\n
Dividend payout ratio. This is a percentage figure which represents a stock\u2019s annual dividend amount divided by its annual EPS. The payout ratio rises and falls as a company\u2019s earnings and dividend rates change. A reasonably low payout ratio of 60% or less indicates that a company\u2019s dividend is sustainable.
\n
Dividend yield. This is another percentage figure representing a stock\u2019s annual dividend amount divided by its current price per share. Dividend yield gives investors an idea of how much a stock pays in annual dividends relative to its price.
\n
Sustained dividend increases. While the dividend payout ratio and dividend yield can inform your understanding of a stock\u2019s current dividend, it\u2019s also key to find stocks that have regularly increased their dividends over time.
\n
Steady growth in EPS and revenue. Dividends are only as healthy as a company\u2019s underlying business. Look for dividend stocks that have delivered stable and growing earnings and revenue.
\n
Durable competitive advantages. There\u2019s no question that companies that have maintained the best dividends for the longest periods have also secured durable competitive advantages. Whether this stems from technology, barriers to entry, high customer switching costs, or a powerful brand, the best dividend stocks have it.
\n
\n
At the time of this writing, the author held a long-term position in Automatic Data Processing, Inc. (ADP). The position did not affect the stocks included on the list.
\n
\n \n \n
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\n Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author\u2019s alone and have not been provided, approved, or otherwise endorsed by our partners.
\n Cory has been a professional trader since 2005, and holds a Chartered Market Technician (CMT) designation. He has been widely published, writing for Technical Analysis of Stock & Commodities magazine, Investopedia, Benzinga, and others. He runs TradeThatSwing.com, has authored several trading courses and books, coaches individual clients, and regularly trades stocks, currencies, and ETFs.
\n The Forbes Advisor editorial team is independent and objective. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. This compensation comes from two main sources. First, we provide paid placements to advertisers to present their offers. The compensation we receive for those placements affects how and where advertisers\u2019 offers appear on the site. This site does not include all companies or products available within the market. Second, we also include links to advertisers\u2019 offers in some of our articles; these \u201caffiliate links\u201d may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor. While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof. Here is a list of our partners who offer products that we have affiliate links for.\n
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Are you sure you want to rest your choices?
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+ "page_name": "Dividends: Definition in Stocks and How Payments Work",
+ "page_url": "https://www.investopedia.com/terms/d/dividend.asp",
+ "page_snippet": "A dividend is a distribution of earnings, often quarterly, by a company to its shareholders in the form of cash or stock reinvestment.A dividend is the distribution of a company's earnings to its shareholders and is determined by the company's board of directors. Dividends are often distributed quarterly and may be paid out as cash or in the form of reinvestment in additional stock. The dividend yield is the dividend per share and is expressed as dividend/price as a percentage of a company's share price, such as 2.5%. Common shareholders of dividend-paying companies are eligible to receive a distribution as long as they own the stock before the ex-dividend date. A dividend is the distribution of corporate earnings to eligible shareholders.",
+ "page_result": "\n\t\t\t\t\n\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t \n \n \n\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\nDividends: Definition in Stocks and How Payments Work\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\n\n\t\t\n\n\n\n\n\n
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\nDividends: Definition in Stocks and How Payments Work
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.\" tabindex=\"0\" data-inline-tooltip=\"true\">\nAdam Hayes\n
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\nFull Bio\n
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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
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Updated December 17, 2023
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\n\nReviewed by\n
\nMichael J Boyle\n
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\n\nReviewed by\n\nMichael J Boyle\n
\nFull Bio\n
\nMichael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.\n
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\nLearn about our \nFinancial Review Board\n
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\n\nFact checked by\n
Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies.\" tabindex=\"0\" data-inline-tooltip=\"true\">\nSkylar Clarine\n
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\n\nFact checked by\n\nSkylar Clarine\n
\nFull Bio\n
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Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies.
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\nLearn about our \neditorial policies\n
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\n
What Is a Dividend?
\n
\nA dividend is the distribution of a company's earnings to its shareholders and is determined by the company's board of directors. Dividends are often distributed quarterly and may be paid out as cash or in the form of reinvestment in additional stock.\n
\n\n
\nThe dividend yield is the dividend per share and is expressed as dividend/price as a percentage of a company's share price, such as 2.5%.\n
\n\n
\nCommon shareholders of dividend-paying companies are eligible to receive a distribution as long as they own the stock before the ex-dividend date.\n
\n\n
\n
\n
\nKey Takeaways
\n
\n
A dividend is the distribution of corporate earnings to eligible shareholders.
Dividend payments and amounts are determined by a company's board of directors.
The dividend yield is the dividend per share, and expressed as a percentage of a company's share price.
Many companies do not pay dividends and instead retain earnings to be invested back into the company.
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Investopedia / Julie Bang
\n\n\n
Understanding Dividends
\n
\nDividends must be approved by the shareholders by voting rights. Although cash dividends are common, dividends can also be issued as shares of stock. Various mutual funds and exchange-traded funds (ETFs) also pay dividends.\n
\n\n
\nA dividend is a reward paid to the shareholders for their investment in a company\u2019s equity, and it usually originates from the company's net profits. For investors, dividends represent an asset, but for the company, they are shown as a liability. Though profits can be kept within the company as retained earnings to be used for the company\u2019s ongoing and future business activities, a remainder can be allocated to the shareholders as a dividend.\n
\n\n
\nCompanies may still make dividend payments even when they don\u2019t make suitable profits to maintain their established track record of distributions.\n
\n\n
\nThe board of directors can choose to issue dividends over various time frames and with different payout rates. Dividends can be paid at a scheduled frequency, such as monthly, quarterly, or annually. For example, Walmart Inc. (WMT) and Unilever (UL) make regular quarterly dividend payments.\n
\n\n
\nCompanies can also issue non-recurring special dividends, either individually or in addition to a scheduled dividend. United Bancorp Inc. declared a 15 cents per share special dividend on Feb. 23, 2023.\n
\n\n
Dividend-Paying Companies
\n
\nLarger, established companies with predictable profits are often the best dividend payers and the following industry sectors maintain a regular record of dividend payments:\n
\nStartups, such as those in the technology or biotech sectors, may not offer regular dividends since these companies may be in the early stages of development and retain earnings for research and development, business expansion, and operational activities.\n
\n\n
Important Dividend Dates
\n
\nDividend payments follow a chronological order of events, and the associated dates are important to determining which shareholders qualify to receive the dividend payment.\n
\n\n
\n
Announcement date: Dividends are announced by company management on the announcement date (or declaration date) and must be approved by the shareholders before they can be paid.
\n
Ex-dividend date: The date on which the dividend eligibility expires is called the ex-dividend date or simply the ex-date. For instance, if a stock has an ex-date of Monday, May 5, then shareholders who buy the stock on or after that day will NOT qualify to receive the dividend. Shareholders who own the stock one business day prior to the ex-date, on Friday, May 2, or earlier, qualify for the distribution.
\n
Record date: The record date is the cutoff date, established by the company to determine which shareholders are eligible to receive a dividend or distribution.
\n
Payment date: The company issues the payment of the dividend on the payment date, which is when the money gets credited to investors' accounts.
\n
\n\n
How Do Dividends Affect a Stock's Share Price?
\n
\nAs an example, a company that is trading at $60 per share declares a $2 dividend on the announcement date. As the news becomes public, the share price may increase by $2 and hit $62.\n
\n\n
\nIf the stock trades at $63 one business day before the ex-dividend date. On the ex-dividend date, it's adjusted by $2 and begins trading at $61 at the start of the trading session on the ex-dividend date, because anyone buying on the ex-dividend date will not receive the dividend.\n
\n\n
Why Do Companies Pay Dividends?
\n
\nDividends are often expected by the shareholders as a reward for their investment in a company. Dividend payments reflect positively on a company and help maintain investors\u2019 trust.\n
\n\n
\nA high-value dividend declaration can indicate that the company is doing well and has generated good profits. But it can also indicate that the company does not have suitable projects to generate better returns in the future. Therefore, it is utilizing its cash to pay shareholders instead of reinvesting it into growth.\n
\n\n
\nA company with a long history of dividend payments that declares a reduction of the dividend amount, or its elimination, may signal to investors that the company is in trouble. AT&T Inc. cut its annual dividend in half to $1.11 on Feb. 1, 2022, and its shares fell 4% that day.\n
\n\n
\nHowever, a reduction in dividend amounts or a decision against a dividend payment may not necessarily translate into bad news for a company. The company's management may have a plan for investing the money such as a high-return project that has the potential to magnify returns for shareholders in the long run.\n
\n\n
Fund Dividends
\n
\nDividends paid by funds, such as a bond or mutual funds, are different from dividends paid by companies. Funds employ the principle of net asset value (NAV), which reflects the valuation of their holdings or the price of the assets that a fund has in its portfolio.\n
\n\n
\nRegular dividend payments should not be misunderstood as a stellar performance by the fund. For example, a bond-investing fund may pay monthly dividends because it receives monthly interest on its interest-bearing holdings and merely transfers the income from the interest fully or partially to the fund's investors.\n
\n\n
\nA stock-investing fund pays dividends from the earnings received from the many stocks held in its portfolio or by selling a certain share of stocks and distributing capital gains.\n
\n\n
Are Dividends Irrelevant?
\n
\nEconomists Merton Miller and Franco Modigliani argued that a company's dividend policy is irrelevant and has no effect on the price of a firm's stock or its cost of capital. A shareholder may remain indifferent to a company\u2019s dividend policy as in the case of high dividend payments where an investor can just use the cash received to buy more shares.\n
\n\n
\nIf a dividend payout is lean, an investor can instead sell shares to generate the cash they need. In either case, the combination of the value of an investment in the company and the cash they hold will remain the same. Miller and Modigliani thus conclude that dividends are irrelevant, and investors shouldn\u2019t care about the firm's dividend policy because they can create their own synthetically. However, dividends remain an attractive investment incentive, with additional earnings made available to shareholders.\n
\n\n
How to Buy Dividend-Paying Investments
\n
\nInvestors seeking dividend investments have several options, including stocks, mutual funds, and exchange-traded funds (ETFs). The dividend discount model or the Gordon growth model can help choose stock investments. These techniques rely on anticipated future dividend streams to value shares.\n
\n\n
\nTo compare multiple stocks based on their dividend payment performance, investors can use the dividend yield factor, which measures the dividend in terms of a percentage of the current market price of the company\u2019s share.\n
\n\n
\nThe dividend rate can be quoted in terms of the dollar amount each share receives as dividends per share (DPS). In addition to dividend yield, another important performance measure to assess the returns generated from a particular investment is the total return factor. This figure accounts for interest, dividends, and increases in share price, among other capital gains.\n
\n\n
\nTax is another important consideration when investing in dividend gains. Investors in high tax brackets often prefer dividend-paying stocks if their jurisdiction allows zero or comparatively lower tax on dividends. For example, Greece and Slovakia have a lower tax on dividend income for shareholders, while dividend gains are tax exempt in Hong Kong.\n
\n\n
\n\n
How Often Are Dividends Distributed to Shareholders?
\n
Dividends are commonly distributed to shareholders quarterly, though some companies may pay dividends semi-annually. Payments can be received as cash or as reinvestment into shares of company stock.
\n
\n\n
\n\n
What Is an Example of a Dividend?
\n
If a company's board of directors decides to issue an annual 5% dividend per share, and the company\u2019s shares are worth $100, the dividend is $5. If the dividends are issued every quarter, each distribution is $1.25.
\n
\n\n
\n\n
Why Are Dividends Important?
\n
Though dividends can signal that a company has stable cash flow and is generating profits, they can also provide investors with recurring revenue. Dividend payouts may also help provide insight into a company\u2019s intrinsic value. Many countries also offer preferential tax treatment to dividends, where they are treated as tax-free income.
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\nArticle Sources
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\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our\neditorial policy.\n
\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
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