How is a dividend paid
How Dividends Work (Get Paid to Own Stock)
so here's the thing with the stock
market if you own stock in a company you
actually own a tiny little piece of that
company in what's called a share and one
of the greatest things about owning
stock is that some of these companies
share their profits with their
shareholders through dividends most
companies will issue dividends four
times a year or once every quarter so
essentially if a company pays out a
dividend four times a year you're going
to get paid four times a year just for
owning that stock so let's pretend that
you own a hundred shares and Ford Motor
Company and they declare a dividend of
fifteen cents a share well with those
hundred shares being fifteen cents a
piece you're gonna make fifteen dollars
right then and there just because you
own a hundred shares and Ford and that's
only one of the payments they're gonna
pay you another three times during the
year for owning those shares as well and
a lot of the time the dividends will
actually go up a little bit over time
here's something for you Warren Buffett
owns 400 million shares of coca-cola and
Coca Cola's last dividend payout was 37
cents a share so in that quarterly
payment alone Warren Buffett would have
received a hundred and forty eight
million dollars just because he owns
that many shares in coca-cola
so you see why dividends might be worth
considering now keep in mind that
dividends are not guaranteed the board
of directors might at some point just
say we want to do dividends anymore and
so you as a shareholder won't be
receiving them just do your research on
the company's dividends before you
invest in them check the history of the
dividends so how long they've been
issuing them how much and if they've
gone up all those kinds of things will
help you make an informed decision on
whether or not you want to invest in
that company based on their dividends
here's an example of Coca Cola's
dividend history apparently they've been
paying out dividends since nineteen
seventy four times a year all the way up
until today so I would bet they're
probably gonna continue doing so in the
future so how do you know if a company
pays out a dividend it's easy you just
have to check some quick stats and then
you'll know right off the bat if they
issue a dividend or they don't so the
first thing you got to do is you got to
figure out what the company's ticker
symbol is so what the heck is a ticker
symbol the ticker symbol is just the
company's name on the stock exchange
for example coca-cola is just Khao Ford
Motor Company F Apple corporation AAPL
if you're worried that you can't find
the ticker symbol just google it you'll
always find it so I'm gonna use Ford
here as an example again like I said
they're ticker symbol is F on the stock
exchange
now I'll quickly show you inside of my
Robin Hood app what you're looking for
when it comes to a dividend with Ford
you see on the bottom right how it says
div yield that right there tells you
that they pay out a dividend so what
does yield mean yield is actually really
important because that's the percentage
of money that the company's paying you
on a yearly basis based on their current
dividends
so the 4.95 that you're looking at means
that Ford is paying you 5% in dividend
yield for holding their stock over the
course of a year
so just for owning stock and Ford
they're gonna pay you 5% a year in
dividends and every single company on
this entire planet is trying to make a
profit including Ford so you're also
assuming that their stock is gonna go up
while you're receiving dividends so how
do you know when a stock is gonna be
paid out you just have to check a few
things that I'll quickly go over the
first thing you've got to pay attention
to is the Declaration date all that
means is that the Board of Directors got
together and they decided that they are
going to pay a dividend how much it's
gonna be and then it's been declared now
the next thing you got to pay attention
to is the ex-dividend date the X date is
really important because you've got to
make sure that you own the stock prior
to that date in order to get paid a
dividend so if you want to take
advantage of the dividend but you don't
own any of that stock then just make
sure you buy the stock one day prior to
that X date that's all you have to
remember just buy it one day before the
X date and you'll get a dividend now
once you've done this you just have to
pay attention to the record date the
record date is gonna happen
two days after the ex-dividend date all
this means is that all the shareholders
at this point have been recorded to
receive their dividends and lastly all
you're looking for is the payment date
and that is the magical day that you'll
get paid your dividend it's really easy
just make sure that you pay attention to
these four little things and you can get
your dividends and one more thing with
this when I first got into
investing I thought that if you bought
into a stock right before the X date
then you could get paid a dividend and
then right after that you could get out
of the stock so you could quickly make
some money to keep things fair and
honest in the market that tactic doesn't
work every time a company issues a
dividend the stock is gonna drop by that
amount so that it's fair the stock will
mostly rebound back up but it's not
gonna happen right on the X date now
there are pros and cons to dividend
paying stocks and non dividend paying
stocks and I'll just go over a couple of
those really quick now the great thing
about dividends is that when you get
paid you can reinvest those into the
same company or you can buy shares of
other companies or you can buy lunch
with the money that's what's so great
about dividends is that you have your
choice of what you want to do with that
cash keep in mind that dividends are
typically paid with really stable
companies and that's because their
growth is usually slowed down a lot so
they can pay you with some of their
profits so typically when you own shares
in a dividend paying stock you're not
gonna see the stock go way up like big
growth companies do companies that don't
pay out dividends are using that money
to reinvest in their company therefore
they'll typically have a lot more growth
than dividend paying stocks and
sometimes that growth far outweighs a
dividend payment especially when they're
growing like 50 a hundred a hundred and
fifty percent a year those kinds of
gains are insane compared to anything
you'll get from dividend paying stocks
but with those kind of gains comes risk
there's always gonna be risk when it
comes to investing but when it comes to
dividend stock investing there's a lot
less risk over there than there is in
the growth stocks I like both types but
honestly dividends are awesome hopefully
by now you know what dividends are and
what they're all about if you don't then
I did a really terrible job making this
video the bottom line here is that
dividends are incredible but there's
still risk when it comes to investing so
do your own research and I'm sure you'll
be just fine
I'm Jason with the honest finance
Channel you just got a ton of
information on dividends so take that
information and do something with it
