A dividend is a payout to shareholders who own stock. According to Investopedia the definition of a dividend is “a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is the most often quoted in terms of the dollar amount each share receives. It can also be quoted in terms of a percent of the current market price.”
What is a Dividend?
We’ve heard about dividends but do we know what is a dividend? When we look at the daily information on stocks, the dividend is commonly reported as a dividend per share, which is the exact dollar amount of dividend that was paid out per individual share. However, sometimes the dividend is reported as a dividend yield, which is a percentage of the total market share price that the dividend represents.
Dividends can also be paid out to Mutual Fund holders. Mutual Funds can be composed of various stock investments. When a High Yield Stock pays out a dividend the Mutual Fund holders will also receive this gain distribution in the form of a dividend payout.
What is a High Yield Stock?
High Yield Stocks pay out the highest dividend; however they also have the highest risk. This means that High Yield Stocks will have the most fluctuations on a daily basis as the market share price changes several times throughout the day. Dividends are a mandatory distribution that must be paid out to shareholders when a company’s stock gains in value.
High Yield Stocks can be very valuable to a long term investment portfolio because they have the potential to grow substantially over the long term. The longer we hold a High Yield Stock in our investment portfolio the more time it has to grow, and the more dividends it can payout to shareholders. Dividends can be paid out on a quarterly or annual basis. High Yield Stocks can be stocks of growing companies, foreign companies, or undervalued companies.
How to find the Dividend Information of a Stock
Here is an example of IBM stock’s daily information from Yahoo Finance. The last piece of information is the dividend information. It shows that each stock received $2.60 in dividends which represents approximately 1.60% of the total market share price of $164.82.
| NYSE: IBM After Hours: 164.80 0.02 (0.01%) 7:18PM ESTLast Trade: | 164.82 |
| Trade Time: | Feb 7 |
| Change: | 0.82 (0.50%) |
| Prev Close: | 164.00 |
| Open: | 164.08 |
| Bid: | 164.80 x 200 |
| Ask: | 165.25 x 100 |
| 1y Target Est: | 165.53 |
| Day’s Range: | 164.02 – 164.99 |
| 52wk Range: | 116.00 – 164.99 |
| Volume: | 4,932,599 |
| Avg Vol (3m): | 4,957,490 |
| Market Cap: | 202.73B |
| P/E (ttm): | 14.31 |
| EPS (ttm): | 11.52 |
| Div & Yield: | 2.60 1.60% |
Tahnya is 30 years old and lives in Montreal Quebec. She graduated in 2005 from Concordia University, and she currently works for a major International Financial Institution. She recently launched http://www.mediamadam.ca/. You can follow her on Twitter @TahnyaP.