Dividend

1. Definition

A Dividend is the distribution of a portion of a company's earnings to its shareholders. * It is typically paid in cash, but can also be paid in additional stock.

2. Why it matters?

• Real Return: Dividends are "cash in hand." Unlike capital gains which are realized only when you sell, dividends provide a steady income stream without selling the asset.
• Compounding: Reinvesting dividends (DRIP) is one of the most powerful ways to build wealth over time due to compound interest.

3. Key Metrics

• Dividend Yield: Annual dividend per share divided by the stock price. It tells you the "interest rate" of the stock.
• Payout Ratio: The percentage of earnings paid out as dividends. (If a company earns \$100 and pays \$30, the Payout Ratio is 30%).

4. Key Dates (The Timeline)

1. Declaration Date: The board announces the dividend.
2. Ex-Dividend Date (Crucial): The cut-off date. You must own the stock before this date to receive the dividend. If you buy on this day, the previous owner gets the money.
3. Payment Date: The day the cash actually hits your account.