WHAT ARE DIVIDEND STOCKS?

Investing in dividend-paying stocks is a great way to build long-term wealth. Below, you’ll find introductory information about dividend stocks. In later sections, we will cover more advanced topics, such as dividend yield and dividend reinvestment programs.

HOW DO DIVIDENDS WORK?

Essentially, for every share of a dividend stock that you own, you are paid a portion of the company’s earnings.

You get paid simply for owning the stock (which is a slice of the ownership of the company you paid for).

For example, let’s say Company X pays an annualized dividend of 20 cents per share.

Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of 20 cents (or 5 cents) for each share you own.

This may not seem like a lot, but when you have built your portfolio up to thousands (if not tens/hundreds of thousands) of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years.

The key is to reinvest those dividends, especially when you have time to reinvest – when you are retired/retiring, you may use/live off those dividend streams that you had accumulated over the years.

WHAT ARE CASH DIVIDENDS AND ONE-TIME DIVIDENDS?

Cash Dividends

These means “the usual dividends” – regular cash dividends are those paid out of a company’s profits to the owners of the business (i.e., the shareholders).

A company that has preferred stock issued must make the dividend payment on those shares before a single penny can be paid out to the common/normal stockholders.

Special One-Time Dividends

In addition to regular dividends, sometimes a company may pay a special one-time dividend (basically means it’s special, and once-off ie non-recurring).

These are rare and can occur for a variety of reasons such as a major litigation win, the sale of a business or liquidation of a investment.

They can be in the form of cash, stock or property dividends.

WHEN DO DIVIDENDS GET PAID?

Dividends must be declared (i.e., approved) by a company’s Board of Directors each time they are paid.

There are four important dates to remember regarding dividends.

  • Declaration date:

The declaration date is the day the Board of Directors announces their intention to pay a dividend.

On this day, the company creates a liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.

  • Date of record:

The date of record is the date on which a company reviews its records to determine exactly who its shareholders are — an investor must be a “holder of record” in order to receive a dividend payout.

A stock will almost always begin trading ex-dividend (or “ex-rights”) the second business day before the record date.

In other words, only the owners of the shares on or before the ex-dividend date will receive the dividend.

If you purchased shares of Coca-Cola on or after the ex-dividend date, you would not receive its upcoming dividend payment; the investor from whom you purchased your shares would.

  • Ex-dividend Date:

The ex-dividend date of a stock is the single most important date for dividend investors to consider.

To receive a stock’s upcoming dividend, an investor must purchase shares of the stock prior to the ex-dividend date.

  • Payment date:

This is the date the dividend will actually be given to the shareholders of company.

HOW OFTEN ARE DIVIDENDS PAID?

Dividends are paid either:

  • once per year
  • twice per year
  • four times per year
  • or worse: irregular (no set schedule) – avoid these if possible (as you want to invest for regular dividend cash flow)

For U.S./Singapore stocks in particular, there are no “set in stone” rules dictating the frequency of dividend payouts.

That is to say, corporations have the freedom to set their own payout policies regarding both the size and timing of their distributions.

With that being said, there is a tradition that most regular corporations will pay out a dividend to their shareholders on a quarterly basis, which aligns with the legal requirement to report earnings on a quarterly basis.

Ultimately, the decision of how of often dividends will be paid out is left to a company’s board of directors.

In many countries outside of the United States, corporations will often times pay out a distribution on either an annual (once a year) or semi-annual (twice a year) basis; as mentioned previously, there are also a number of U.S. stocks that don’t follow the quarterly tradition, instead they too will make annual or semi-annual distributions to their shareholders (quite a few of the dividend stocks that I invest in Singapore pay dividends 2x per year ie every 6 months)

There are other instances when securities will not stick to a quarterly dividend payout plan.

More often than not, companies that are legally structured with the intent to generate a consistent distribution of income to shareholders will pay out dividends on a monthly basis; specifically, this includes many, but not all, real estate investment trusts (REITs) as well as master-limited partnerships.

These companies may be appealing to investors who require a more frequent stream of income.

WHAT EXACTLY IS A STOCK DIVIDEND?

A stock dividend is a proportionate distribution of additional shares of a company’s stock to owners of the common stock.

In other words, you will receive additional shares of stock when a company declares a stock dividend, in contrast to a cash dividend.

A company may opt for stock dividends for a number of reasons including inadequate cash on hand or a desire to lower the price of the stock on a per-share basis to prompt more trading and increase liquidity.

The term “stock split” can also apply to stock dividends.

KEY LESSONS IN THIS ARTICLE

  • Dividends are a way that companies reward shareholders for owning the stock, usually in the form of a cash payment.
  • Normally, companies pay cash dividends on a regular basis (often quarterly). Sometimes, they’ll elect to pay a one-time dividend, as well.
  • Stock dividends are another type of payment that involve additional shares of stock instead of cash. These are also know as stock splits.

Related Posts

I Decided To Learn More A…
www.nigelchua.com

Make Money Online Singap…
www.nigelchua.com

Happy 36th Birthday To Me
www.nigelchua.com

How To Avoid Scams Online…
www.nigelchua.com

About NigelChua.com
www.nigelchua.com

Wealthy Affiliate – My…
www.nigelchua.com

Assets Pay For Lifestyle And…
www.nigelchua.com

JOIN ME IN INTUITIVE, LOVING, GENTLE AND GOOD SUCCESS AND SELF MASTERY THAT ACTUALLY MATTER. NO HYPE. NO BULLSHIT.

Hang around here for some time, you’d see that I don’t well with hype or bullshit. I can smell that typically a mile away, and I hate that shit too.

I’ve been working on myself and on NigelChua.com for years, since 2006, and only in late 2019, I started to focus on intuitive and loving leadership, entreprenership and personal development.

Here are some areas that I work on a consistent, ongoing basis.

Back To Home / Main Page

See the Tools & Resources I use to improve my life, businesses, health, build passive income and more.

The core topics I cover in NigelChua.com is:

  1. Eternal life and salvation: Jesus Christ is the Way, the Truth & the Life
  2. Fix your health: get healthier, live longer, run faster, more energy, fuck more
  3. Passive Income Lifestyle: Become financially secure by building assets that provides multiple streams of passive income that’s more than your living expenses
  4. Personal Loving Relationships: Attract, build and grow relationships you love
  5. Philanthropy: giving to the poor and needy
  6. Philosophy: Conscious, purposeful and positive living
  7. Productivity: How to become more efficient and productive in important things. Mastering them causes you take less them whilst increasing productivity.
  8. Insure yourself and your loved ones (Health insurance is important)
  9. Add-on Adventures: Become rich and wealthy
  10. Add-on Adventures: Build businesses that add positive value to your society and life
  11. Success Principles

Take action TODAY: One year from today, you’ll be one year older. What would you have done by then?

Where To Next?


  • If you’re new here, do subscribe to my newsletter – no spam and just my best stuff. Unsubscribe anytime.
  • Go to the Start Here it’s created to be my good success and life thesis, so it’s very content heavy (Read: lots of words and links to resources, write ups and videos). It’s constantly updated too with new data and updates as often as I can.
  • If you like videos, head to All Videos – all the latest (and all) videos are uploaded there.
  • Visit the Blog to read the latest articles and videos. You can see all / my entire list of previous articles here: Archive
  • Head over my Resources page to see the curated products and services I use / have used to improve different aspects of my life be it business, relationships, health and more. Note: recommendations in nigelchua.com may be affiliate links, which means I may get paid if you choose to buy through my affiliate link.
  • If you’d like to ask me any questions, head to the Questions/Ask Nigel section
  • Contact me if you like to thank me for helping you in some way (please, always tell me – it’s such emails that I truly look forward to), interview me, ask me to try a product, or media inquiries.
  • If you like my work and want to support me / my cause by giving a tip / donation or choose to buy stuff at my products and tool page – thank you for your support. You keep me going.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.