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Financial Advisor Gaithersburg MD: What is a Dividend?

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What is a Dividend?

Our financial advisors can lead you in the right direction for investing in your future today! First, what is a dividend? A dividend is a payment made by a company or corporation to all of its shareholders. Most commonly, the reason for paying out a dividend is to distribute profits to shareholders.

How is a Dividend Paid Out?

In most cases, a dividend is paid out according to shares held. For example, if a person owns four shares of a company, and that company pays out a dividend of $1 per share, then that shareholder will get $4 in income. Our financial advisors are experts at helping you to select and purchase the right dividend-yielding stocks for your portfolio.

In publicly traded companies, dividends are usually paid out on a schedule, so shareholders can expect to receive their dividends at the same time every year. This element of predictability is important if your investment goal is income – Our financial advisors will help you use this predictability to increase your peace of mind. Of course, dividend-yielding companies can also sometimes pay out special dividends, usually in the case of higher-than-anticipated profits for a quarter or year.

Types of Dividends

Cash dividends are paid automatically to all shareholders of a company. However, investors do have control over the fate of their dividend. When a cash dividend is paid out, investors have an important decision, which a financial advisor can help to make. The two options are to take the dividend as a cash payout, or reinvest it back into the stock to increase their overall holding. Each has its advantages and disadvantages.

Cash dividends are not the only type, but they are the most common. Another, less common, type is the stock dividend. A stock dividend is the granting of additional shares of a stock based off of how many shares they already own, and is expressed as a percentage. For example, if an investor owns 100 shares of a company and that company issues a 5% stock dividend, that investor is given another 5 shares.

Dividend yielding stocks can be great for your portfolio, whether your goal is growth or income. If you need more information about dividends contact CIC Wealth today; our financial advisors are here to help.