What Are Dividends And How To Find A Dividend Stock?

What Are Dividends And How To Find A Dividend Stock?

What Are Dividends And How To Find A Dividend Stock?

Why do people invest in stocks? The simple answer to this question is to earn money. One buys stocks, and for each stock, there comes a dividend that is given by the company. The most profitable path is to find a stock that pays a stable dividend to the holders. To know what is dividend and how it works and how to recognize a stock that gives dividends at https://www.webull.com/quote/dividends, read further.

About dividends

One thing that an investor needs to be sure of before investing in stocks is that not all the stock pay share of their earnings. One may buy stocks at a certain price and then sell the stocks when the price of the shares is high. This is the basic idea behind stock trading. But other than this, a well-established company also tends to give a dividend to its shareholders. 

This dividend is nothing but a share of the earnings. The dividend paid to the holders depends on the number of dividend shares they hold. The total dividend is divided by the total number of shares. The final dividend of each shareholder is then sent to the broker account of theirs.

Usually, two types of dividends are paid to the stockholders. One is the regular cash dividend that is paid at regular intervals for owning the shares. And, the second one is the special one time type of dividend. These are paid when the company sees a major earning like selling off an in investment or a litigation win.

Payment of dividends

The dividend is paid to the shareholders at regular intervals. It can be either once in a year on an annual basis or can be paid on a half-yearly basis, quarterly basis, or monthly basis. This entirely depends on the company policy and overall earnings of the company as well.

Before the dividends are paid, there is a need for the board of members to approve them. There are in total four dates that are regarded as important in payment of dividend.

  • Declaration date: the date on which the company tells its shareholders about the payment of divide
  • Ex-dividend date: this is the date before which one needs to buy stocks of the company to become eligible for the dividend.
  • Date of record: on this date, the company checks its record of shareholders.
  • Payment date: on this date, the dividend is paid to the shareholders.

Finding a dividend-paying stock

Few things that need to be kept in mind while choosing a stock that pays the dividend are:

  • Sector: one should first give a broader look to the sectors and see which one is doing well. A growing sector is more promising. However, one should keep a holistic view as the sectors tend to change in their trends.
  • Long term earnings: a company should have long term earnings and not just a profitable quarter. Look for a company with a 5 to 15 percent growth in earnings.
  • Debt: one should stay away from those dividend stocks who have heavy debts on them. Having debts means the company will use the earnings to pay off the debts and not keep the word to pay dividend yields.

Conclusion

Dividend stocks are the ones that many shareholders tend to run for. But, finding the right dividend stock takes time and some research into the finances of the company. Always remember, a growing company will never pay the dividend, but a well-settled are the ones who will keep their word in paying the dividend. You can check more stock information before to find stocks to invest in. Disclaimer: The analysis information is for reference only and does not constitute an investment recommendation.