What is a Dividend?

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A Simple Dividend Definition

Generally speaking, a dividend is a distribution of a portion of a company's earnings paid to the shareholders. Dividends can provide income and growth for long-term investments. Yep more growth for you!

Company X has a share price of $100, and you own 100 shares. Company X announces they will pay a $1.50 dividend per share on the next payment date. 

Dividend Example

On the payment day, you'll receive $150 worth of dividends.  After that, however, the stock price will likely drop the same $1.50 as the company is technically worth that much less after paying its shareholders that amount per share.

Dividend Example

The simple answer is to attract more investors. Many companies that payout dividends are well-established and stable companies. 

Why Companies Pay Dividends

By paying a dividend, they attract investors creating more demand for their stock

Why Companies Don't Pay Dividends

Many companies won't pay dividends for several reasons, the biggest being it hurts their bottom line.   That is much less cash the company has and is therefore much less valuable when paying out dividends.

Why Should you Care?

Investing in a balance of companies that pay Dividends can help you reinvest more money faster and increase your compound interest rate so you should care!

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