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What are dividends?

Generate income with your investments without having to sell.

December 13, 2023

what are dividends

Below we discuss what dividends are, where they come from, and how you can find out if a stock pays them or not.

Dividends explained

A dividend is a sum of money paid by a company to its stockholders (typically quarterly) 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!

With the Plynk app, dividends are automatically reinvested for you (unless you choose otherwise).

How to find out if a stock pays dividends

When viewing a specific stock in the Plynk app, click on the Performance tab. In the Key Metrics section 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 has paid out each year in dividends.

Next steps to consider

Visit the app’s Discover page and give Plynk Explore a try! It lets you view investment options based on your desired level of risk, a variety of categories (including dividend yield), as well as either historical performance or expert rating.

You can also click on the Dividend Stocks category to see a list of available stocks filtered by highest dividend yield. This is one of many characteristics to think about as you research investment ideas.

Or, simply browse stocks that may interest you and find out if they pay dividends.

Read more: How to invest based on your interests

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