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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