What Is a Dividend?

When a company makes a profit, it has two options: put the money back into the business, or hand it to shareholders. The second is called a dividend.

How Yield Is Calculated

Dividend yield = annual dividend ÷ share price

A company with a $100 stock paying $3 a year yields 3%.

The Four Dates

The critical one is the second. On the morning of the ex-dividend day the stock opens lower by the amount being paid. This is not a selloff; it's bookkeeping: a company about to pay out $3 has exactly $3 less in its till.

A dividend is not free money. It is the company's own equity, moved into your pocket.

Understanding that also explains why "buy the day before the ex-date, sell the day after" doesn't work.

Who Pays, Who Doesn't

Payers: mature, cash-generating companies with limited growth opportunities — utilities, big food and beverage brands, telecom, banks, insurance.

Non-payers: growing companies. For a business growing 30% a year, reinvesting the profit is worth more than paying it out. In tech, starting a dividend often reads as a message: "we've matured" — good news to some investors, bad news to others.

Total Return

A stock pays you in two components:

• 01Capital gains: the price rising.
• 02Dividend income: the cash paid out.

The sum is total return. Most index charts show price only; with dividends reinvested, the long-run difference is enormous. Over multi-decade horizons a meaningful share of the S&P 500's total return has come from dividends. "The index rose X% in 20 years" understates what investors actually earned.

Where You'll See It on This Site

The Key Metrics card on the stock page shows the dividend yield. Interpreting it requires the sector: 4% is normal for a utility; the same number at a software company is a question that needs asking.