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A dividend is a share of profit a company chooses to pay. Learn how payments work, how to read the numbers on a stock page, and why no dividend is certain.
Many stock pages show a dividend, a yield and an ex-dividend date next to the price. This topic explains each of them in plain language. Investor.gov defines a dividend as a portion of a company's profit paid to shareholders [1], and the decision belongs to the board: under Delaware law, for example, it is the directors who may declare and pay dividends [2]. FINRA is blunt about the limit: a company may pay dividends on its common stock, but it doesn't have to, and it can cut or eliminate them [3].
Start with how dividends work. It follows one payment from the board's declaration to the cash in your account, explains the four dividend dates and what can happen to the share price when a stock goes ex-dividend. Then read the ex-dividend date for the cut-off rule in more detail: buy before it and you get the next dividend, buy on or after it and the seller does [4].
Dividend yield explained shows how to calculate the yield, why it rises when the price falls [5], and how a high yield can hide a falling stock or a coming cut. The payout ratio compares dividends with earnings, using figures from real company filings, and explains what a ratio above 100% means. Dividend reinvestment covers plans that use your dividends to buy more shares.
Two glossary entries tie it together. Dividends are only part of what you earn from a stock: FINRA explains that dividend yield is added to capital gains or losses to give the total return [5], and a capital gain is the price part of that sum. To try the arithmetic yourself, use the dividend yield calculator.
Every explainer uses hypothetical companies calculated in code, or figures companies reported in their own SEC filings. We do not rank dividend stocks, and nothing here is a recommendation to buy or sell anything.
Start with this
Dividends & Income8 min read
Who declares a dividend, the four dates that decide who is paid, why the price can drop on the ex-dividend date, and how dividends are taxed.
Read the explainerDividends & Income6 min read
The dividend yield formula, a worked example, why yield rises as the price falls, and how a high yield can be a warning rather than a bargain.
Dividends & Income6 min read
The payout ratio formula, a worked example, real ratios calculated from Coca-Cola, Microsoft and Chevron filings, and what a ratio above 100% means.
Dividends & Income8 min read
The four dividend dates, how the ex-dividend date is set under T+1 settlement, when you must own the stock, and why buying just for the dividend rarely works.
Dividends & Income8 min read
How a DRIP turns each dividend into more shares, what a real plan prospectus says about discounts and fees, and why you still owe tax on dividends you never saw as cash.
TOTAL RETURNWhat is total return? The change in an investment's value plus the income it paid, with FINRA's worked example, the annualized rate and what it leaves out.
What is a capital gain? The profit when you sell an asset for more than its adjusted basis, short-term versus long-term, with a calculated stock example.
How a payment works and who gets it. Read how dividends work first, then the explainers on yield and the payout ratio.
No. Unlike interest on a bond or a CD, dividends on stock can be reduced or eliminated in lean periods [6].
In a taxable account, yes. The IRS taxes ordinary dividends as ordinary income and qualified dividends at the lower capital gain rates [8].
