Dividends can be a welcome source of income, and they can also be used to grow your portfolio if you’re reinvesting them in additional stock shares. How often are dividends paid is a common question for dividend investors and it’s important to understand how the process works. Generally, companies can pay out stock dividends quarterly though some may do so monthly or annually. In terms of when dividends are paid out and who’s eligible to receive them, there are several key dates to know. Many investors have found that working with a financial advisor was a major part of their success.
How Often Are Dividends Paid for Stocks?
A dividend is simply a percentage of the profits a company makes that’s paid out to shareholders. Some companies pay out 100% of earnings to investors while others pay less. And some companies don’t offer any type of dividend payout at all.
Dividends can be paid in cash or in shares of stock. In most cases, companies that pay dividends to shareholders do so quarterly. That means if you own a dividend stock you can count on a dividend payout every three months. Some companies, however, choose to pay dividends out monthly, semiannually or annually instead.
In some cases, a company can also issue what’s known as a special dividend. This is a one-time payment you receive in addition to regular dividend payouts. Companies may choose to offer a special dividend following a stronger than usual earnings period.
Before dividends can be paid out, the payments have to be approved by the company’s board of directors. Once this happens, the company will announce when the dividends are to be paid out to investors.
How Dividend Payouts Work
If you buy into a dividend-paying stock you might automatically assume that you’ll receive the next dividend payment. But there are some key dates companies use to determine who gets a dividend payment. First, there’s the declaration date. This is the date that the company declares a dividend payout. In other words, it’s when the company announces that a dividend payout is forthcoming.
Next is the record date. The record date is the date that you must be on the company’s books as a shareholder to receive a dividend payment. Any shareholders listed in the company records on the date of record are eligible to receive a declared dividend payout.
The day before the record date is the ex-dividend date. This is the date that you must own the stock by in order to benefit from an upcoming dividend payout. If you buy shares of dividend stock on or after this date, then you won’t be able to get the next dividend payment. Instead, the seller of those shares would collect those dividends.
Finally, you have the payment date. This is the date that dividends are paid out to investors. Typically, the payment date follows the record date by a month. The actual date dividends hit your investment account once they’re paid out can depend on your brokerage.
So what does all this mean for you? Simply that if you want to benefit from a dividend payout you have to be listed as a shareholder on the record date. That means you’ll need to own shares before the ex-dividend date.
If you’re wondering how often are dividends paid for a particular stock you own, you can typically find this information listed on the company website. For example, the Coca-Cola website’s FAQ section mentions that dividends are typically paid four times a year, on April 1, July 1, Oct. 1 and Dec. 15.
How Dividends Are Paid Out to Investors
Just as companies can decide when to pay out dividends to investors, they can also choose what form those payments will take. For instance, dividends can be paid out in cash, either as an electronic deposit to your brokerage account or a paper check. You may prefer this option if you’re interested in using dividends for current income.
Companies may also offer a dividend reinvestment plan as an option for dividend payouts. With a DRIP, your dividends are used to purchase additional shares of the same stock. These can be full or fractional shares, depending on how much you receive in dividend payments and the stock’s price per share.
Choosing to reinvest dividends could make sense if you don’t need them for income right now. You can effectively grow your position in a particular stock without having to invest any additional money out of pocket. Depending on the plan, you may be able to purchase additional shares at a discount without paying commission fees, which can make reinvesting dividends even more valuable.
Choosing Dividend Stocks to Invest
If you’re interested in dividend stocks, then it’s important to compare options to find ones that are a good fit. Along with asking how often are dividends paid, it’s also helpful to consider other factors such as dividend yield, dividend per share and the dividend payout ratio. The dividend yield is a measurement of a company’s annual dividend, divided by its share price. In simple terms, the dividend yield tells you the percentage of a company’s share price is paid out in dividends. A higher dividend yield could make a stock look more attractive, but it’s important to consider how sustainable it is over time.
Dividend per share refers to how much a company distributes in dividends for each of its shares of outstanding stock. This metric makes it easy to see at a glance which companies are growing their dividend payouts over time.
Finally, you have the dividend payout ratio. This ratio illustrates how much of a company’s net income goes toward dividend payouts. A higher dividend payout ratio means the company is giving more of its net income back to investors, versus investing in growth, paying off debts or increasing cash reserves. A lower dividend payout ratio means the company is keeping more of its earnings for itself.
One isn’t necessarily better than the other, as they can both reflect the company’s goals and where it is in its life cycle. Using the dividend payout ratio, alongside dividend yield and dividend per share, can help with choosing dividend stocks that are the best fit for achieving your investment goals.
The Bottom Line
How often are dividends paid is an important question if you’re banking on dividend payouts for income. And even if you’re reinvesting dividends into additional shares, it’s still helpful to know when you can expect those payments to be forthcoming. Either way, you can use the dividend payout calendar to plan your next investing move.
Tips for Investing
- Consider talking to a financial advisor about the benefits of dividend stocks and how to benefit from dividend payouts. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors online. You can get your personalized recommendations in minutes. If you’re ready, get started now.
- Your investments should range from different kinds of stocks to various bonds, exchange-traded funds (ETFs) and more. You can determine a suitable asset allocation calculator based on your risk tolerance and time horizon.
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