Dividend

A dividend is a payment made by a corporation to its shareholders, usually from profits. It represents a way for companies to share their success with investors.

Types of Dividends:

• Cash dividends: Most common, paid per share
• Stock dividends: Additional shares instead of cash
• Special dividends: One-time payments (often from asset sales)
• Preferred dividends: Fixed payments to preferred shareholders

Important Dates:

1. Declaration Date: Board announces dividend
2. Ex-Dividend Date: Buy before this to receive dividend
3. Record Date: Must be shareholder of record
4. Payment Date: Dividend is paid

Dividend Metrics:

• Dividend Yield: Annual dividend ÷ stock price
• Payout Ratio: Dividends ÷ earnings (sustainability check)
• Dividend Growth Rate: Year-over-year increase

Dividend Aristocrats: S&P 500 companies with 25+ consecutive years of dividend increases:

• Examples: JNJ, PG, KO, MMM
• Show commitment to returning capital to shareholders

Tax Treatment (US):

• Qualified dividends: 0%, 15%, or 20% depending on income
• Non-qualified: Taxed as ordinary income
• Hold 60+ days for qualified treatment