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What Are Dividends?

May 20, 2014

A dividend is a payout that some companies make to shareholders that reflects the company's earnings. Often paid out quarterly (every three months), dividends give stockholders a steady return, regardless of what happens to the stock price.

Typically, older, well-established companies pay dividends, while newer companies do not. Dividends are not guaranteed, so a company can stop paying them at any time.

To keep your money growing as fast as possible, it's smart to keep reinvesting your dividends rather than spending them when you receive them. The easiest way to do this is to sign up for a dividend reinvestment plan (DRIP), which will make reinvestment automatic.

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