What is a dividend and how is it paid?

A dividend is a portion of a company’s profits that is distributed to shareholders, typically in cash or additional stock. Dividends are usually paid by well-established companies with stable earnings and are often issued quarterly. The board of directors decides whether to pay dividends, how much, and on what schedule. Cash dividends are deposited directly into a shareholder’s brokerage account or sent as checks. Stock dividends provide additional shares instead of cash. Key dates include the declaration date, ex-dividend date (by which you must own the stock to receive the dividend), record date, and payment date. Dividends provide regular income to investors and are especially valued in retirement portfolios. Not all companies pay dividends; some reinvest profits into growth. Dividend yield (annual dividend divided by stock price) helps measure a stock’s income potential.