A dividend is a share of profits paid to owners. Established, profitable companies often pay dividends; growing companies often reinvest instead, so paying no dividend isn't automatically bad.
Dividends can be reinvested automatically through a DRIP (Dividend Reinvestment Plan), quietly buying more shares each quarter and compounding returns over decades.
See also
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Open Decision Lab →Frequently asked questions
What is the ex-dividend date?
The cutoff date for owning a stock to receive the next dividend. Buy on or after the ex-dividend date and you miss that payout.
Are dividends taxed?
Usually yes, though 'qualified' dividends in the US and equivalent categories elsewhere often receive preferential rates over ordinary income.
Related terms
Dividend yield
Annual dividend divided by share price, expressed as a percentage.
Payout ratio
The share of earnings a company pays out as dividends.
Dividend reinvestment plan (DRIP)
An automated setup that reinvests dividend payments into more shares of the same stock or fund.
Capital gain
The profit made when you sell an investment for more than you paid.
Share buyback
When a company repurchases its own shares from the open market, reducing shares outstanding.