Dividend
A portion of a company's profits distributed to shareholders, typically paid quarterly in cash.
What is Dividend?
A dividend is a distribution of a portion of a company's earnings to its shareholders, authorized by the board of directors. Dividends are most commonly paid in cash on a quarterly basis, though some companies pay monthly or annually, and some distribute additional shares (stock dividends) or allow dividend reinvestment (DRIP). The dividend yield measures the annual dividend as a percentage of the current stock price. Companies with long histories of consistent or growing dividends — called Dividend Aristocrats (25+ consecutive years of dividend increases) or Dividend Kings (50+ years) — are often sought by income-oriented investors. Paying dividends signals financial stability but reduces retained earnings available for reinvestment.
Example
Johnson & Johnson has increased its quarterly dividend for over 60 consecutive years, qualifying it as a Dividend King. In 2024, JNJ pays $1.24/share quarterly ($4.96 annually). With the stock at $160, the dividend yield is 3.1%. A long-term investor holding 1,000 shares receives $4,960 annually in dividend income, regardless of stock price movement.