What are dividends?
Make money with your investments without having to sell.
December 13, 2023
Below we discuss what dividends are, where they come from, and how you can find out if a stock pays them or not.
A dividend is a sum of money paid regularly (typically quarterly) by a company to its stockholders to share its profits. Dividends are a way you can receive income from your investments without having to sell them.
Who pays dividends?
Some stocks pay dividends and some don’t. A company’s board of directors can choose to issue dividends over various time frames and with different payout rates. Larger, more established companies with more predictable profits are more likely to pay dividends.
Why do companies pay dividends?
When a company has historically paid a regular dividend (or an increasing dividend), it can reflect positively on the company and help to maintain investors’ trust. Dividends are often preferred by income-oriented shareholders because they are treated far better than capital gains (profit from selling investments) when it comes to taxes.
Funds can pay dividends too
If you’re looking for dividends, individual stocks aren’t your only option. When you invest in a mutual fund or ETF that contains dividend-paying stocks or bonds, the companies will pay the dividends to the fund and they will then be passed on to you through a dividend distribution.
Reinvesting your dividends
When you’re paid dividends you have 2 options: keep them as income or reinvest them to buy more of the same stock/fund. Many stocks/funds have plans that allow you to buy more shares by automatically reinvesting dividends. This can be an easy way to boost your invested amount without having to spend money out of pocket!
How to find out if a stock pays dividends
When viewing a specific stock in the Plynk app, click on the words “Show more.” At the bottom of the page you’ll see the term dividend yield, followed by a percentage (or N/A if the stock doesn’t pay dividends). This number is the percentage of the company’s stock price it pays out each year in dividends.
Next steps to consider
Visit the app’s Discover page to browse stocks that may interest you and find out if they pay dividends.
Read more: How to invest based on your interests