When a company makes a profit, it can reinvest the money in the business or pay part of it to shareholders. That payment is a dividend, and it's one of the two ways a stock can make you money. The other is the share price rising.
Dividend yield
Dividend yield is the annual dividend divided by the share price. A stock priced at $100 that pays $3 a year has a 3% yield. A very high yield can be a warning sign: it sometimes means the share price has fallen because investors expect the dividend to be cut.
The dates that matter
Every dividend has a timetable. The two dates to watch are:
- Ex-dividend date: you must own the stock before this date to receive the next payment.
- Payment date: the day the cash arrives in your account.
Reinvesting dividends
With WesternBullVest you can switch on automatic dividend reinvestment. Each payment is used to buy more of the same stock, even in fractional amounts, so your holding grows without you lifting a finger. Over many years, reinvested dividends can make up a large share of total returns.
This guide is for education only and isn't investment advice. Investing involves risk, including the possible loss of principal.
