Dividend
Definition
A payment made by a corporation to its shareholders, usually from profits, distributed as cash or additional shares of stock.
Formula
Dividend Yield = (Annual Dividend per Share / Price per Share) × 100A dividend is a portion of a company's earnings that is distributed to shareholders as a reward for owning the stock. Dividends are typically paid quarterly, though some companies pay monthly, semi-annually, or annually. Not all companies pay dividends; many growth companies reinvest all profits back into the business.
Dividend yield is calculated by dividing the annual dividend per share by the stock price. A company paying $2 per share annually with a stock price of $50 has a 4% dividend yield. The payout ratio measures what percentage of earnings are paid as dividends.
Dividend investing is popular among retirees and income-focused investors because it provides regular cash flow. Dividend aristocrats, companies that have increased their dividends for 25 or more consecutive years, are considered particularly reliable. Reinvesting dividends through a DRIP (Dividend Reinvestment Plan) accelerates wealth building through compounding.
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Related Calculators
Related Terms
Yield
financeThe income return on an investment, usually expressed as an annual percentage based on the investment's cost or current market value.
Securities
financeTradable financial instruments including stocks, bonds, and options that represent ownership, debt, or the right to buy or sell an underlying asset.
P/E Ratio (Price-to-Earnings)
financeA valuation metric that compares a company's current stock price to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.
Return on Investment (ROI)
financeA performance measure used to evaluate the profitability of an investment, expressed as a percentage of the original cost.
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