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A dividend is defined as a payment made by a corporation to its shareholders. Usually these payouts are made in cash (called “cash dividends”), but sometimes companies will also distribute stock dividends, whereby additional stock shares are distributed to shareholders. Stock dividends are also known as stock splits.

Cash dividends are normally paid to shareholders each quarter, or four times per year. However, some companies pay dividends annually (once per year), semi-annually (twice per year), or even monthly (12 times per year). Each company sets its own payout schedule and determines the dividend dates on which the dividends will be made. Some companies will even pay a special (one-time) dividend every so often. These special payouts are separate from the company’s regular payout schedule and are not factored into the stock’s dividend yield.

Not every company pays dividends, and companies can change their dividend policies at any time. As investors become increasingly hungry for yield, however, more and more companies are initiating new dividends and raising their existing dividends.

  • The term “dividend” derives from the Latin term dividendum, or “thing to be divided.” In other words, companies divide their profits up among shareholders.
  • Companies have been paying dividends to shareholders for over 400 years. The first company to ever pay a dividend was the Dutch East India Company in the early 1600s.
  • Dividends alone have accounted for over 40% of the S&P 500’s total returns since 1929.

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