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Not investment advice. Educational reading. See Disclaimer.
L.7 · BEGINNER · 2 MIN

Dividends: Getting Paid to Own Stocks

Dividends are cash payments companies make to shareholders, usually quarterly. Not all companies pay them, but those that do share profits directly with you.

Quiz · 5 questions ↓

Johnson & Johnson's dividend yield, live

JNJ — Dividend Yield, Current Price. Open JNJ on the Ledge to see current values.

The dividend-yield formula

Dividend Yield = Annual Dividend / Stock Price

Growth stocks, dividend stocks, and REITs (real estate investment trusts — companies that own income-producing property and pay out most profits as dividends)

TypeGrowthYieldExample
Growth stocksHighLow or 0%Tech companies reinvest profits
Dividend stocksModerate2-4%Utilities, consumer staples
REITsLow-moderate4-8%+Required to distribute 90% of income

Find a dividend yield (JNJ)

Look up JNJ and find the dividend yield in the key metrics.

Dividends pay you whether or not the stock moves

Dividends provide income regardless of stock price movement. A 3% yield means you earn $3 per year for every $100 invested, even if the stock goes nowhere.

Does paying a dividend make a stock better?

Company A pays a $1/year dividend and trades at $50. Company B pays no dividend but trades at $50. You have $5,000 to invest. Which is the better investment?
Check your understanding

Sit with the ideas.

Company A pays a $2.00 annual dividend and trades at $100. Company B pays $4.00 and trades at $50. Which has the higher dividend yield?

Why:
Continue this lesson in the appAdaptive practice · saves your progress · remediation when you miss

Other lessons in this course.

  1. 01What Is a Stock?
  2. 02How Stock Exchanges Work
  3. 03Sectors: How the Stock Market Is Organized
  4. 04Market Cap: Small, Mid, and Large
  5. 05Dilution: When Your Slice of the Company Shrinks
  6. 06What Moves Stock Prices?
  7. 07Dividends: Getting Paid to Own Stocks— reading now
  8. 08Bulls, Bears, and Market Cycles
  9. 09Reading a Stock Chart
  10. 10Order Books and Price-Time Priority
  11. 11Market, Limit, and Stop Orders -- and Slippage
  12. 12Short Selling, Locate, and Failure to Deliver
  13. 13Corporate Actions: Splits, Spin-Offs, DRIPs, and Dividends
  14. 14IPO Mechanics and Lockup Expiration
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