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Investing

What is a dividend?

The meaning

A cash payment a company sends to people who own its stock, usually every quarter or every month, just for owning the stock. Not every company does this. The ones that do tend to be more established businesses that generate consistent profits. Dividends are one of the main ways investments can create steady investment income. More in Why Investors Love Dividends and Not All Dividends Are Created Equal.

Example
100shares you own×$0.40paid per share=$40every quarter
Four times a year, or $160 a year, landing in your account as cash.
Walk through the numbers

You own 100 shares of a fund that pays $0.40 per share every quarter. Four times a year, $40 lands in your brokerage account as cash, or $160 a year.

Why it matters

Dividends are investment income you can see and count. They are how your money starts paying you, month after month.

Read: Why Investors Love Dividends →Compare: Qualified vs ordinary dividends →

Related terms

Dividend yieldA year of dividends divided by the share price, shown as a percent.Dividend reinvestmentUsing your dividends to buy more shares, so your income grows on its own.StockA small slice of ownership in a company.YieldThe income an investment pays each year, as a percent of what it costs.

See all 34 terms · Read the full glossary

For education only and not personalized investment advice. Examples are hypothetical illustrations, not a prediction or a promise of results. All investing involves risk, including the possible loss of principal.