A Simple Explanation for Dividends

dividends can be a valuable part of anyone’s investing portfolio.

Whether you are just starting to invest or have been investing for decades,

However, you’ll typically see dividends associated with those getting closer to retirement.

As with any part of investing, you should first understand what it is you’re investing in.

Although Reddit can provide an abundance of personal finance information,

we’ll focus on investing in anything that pays out dividends.

What is a Dividend?

Generally speaking, a dividend is a distribution of a portion of a company’s earnings paid to the shareholders.

Let’s use a basic example of how a dividend  might work.  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.

Why Companies Pay Dividends

The simple answer is to attract more investors. By paying a dividend, they attract investors creating more demand for  their stock.

How Do You Earn A Dividend?

The company will automatically pay to your brokerage account at distribution time by buying a stock or mutual fund that pays out dividends.

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