All About Dividends

Want to earn some cold, hard cash? Some profitable companies distribute their profit to their shareholders regularly in the form of dividends, resulting in passive income for investors.

What are dividends?

Dividends are the distribution of earnings. A company may decide to pay dividends to its shareholders because the company has continuously proven its strong financial performance, growth, and customer loyalty.

Not all profitable companies pay out dividends. Others may decide instead to reinvest their earnings back into the business.

How do you know when a company pays a dividend?

As an investor, you will want to strategize and decide what types of stocks you will invest in and trade before you begin trading (for example, growth stocks vs. value stocks).

You may realize that your investment goals require different types of strategies to reach those goals. This might include investing in certain value stocks because of their regular dividend payouts.

Look to see if a company has a dividend yield listed and when its last dividend payout was, if ever. Some companies only pay dividends intermittently and may not currently be offering shareholders liquidity.

Investors can automatically reinvest dividends to help deliver compounded capital gains.

Bottom line on dividends

Dividends are a great tool for passive income. Even if a company's stock returns are just average for the market, dividend payouts can increase the value of your position (especially when you automatically reinvest).

Companies like BlackRock Inc. (NYSE:BLK) have a high share price, and even a 1.75 percent dividend yield adds up. With a share price above $940 at the end of October 2021, that's a dividend payout of $16.45 per share that helps build your wealth over time. BlackRock recently partnered with a Saudi infrastructure fund, meaning GCC investors can gain global exposure abroad and at home in one fell swoop.