Dividend
A dividend is a distribution of a portion of a company's earnings to shareholders, typically paid quarterly in cash or additional shares.
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Exam Tip
Ex-dividend date is 1 business day before record date. Buy BEFORE ex-date to get dividend.
What is a Dividend?
A dividend is a payment made by a corporation to its shareholders, usually from profits. Dividends reward investors for holding the stock and provide income without selling shares.
Types of Dividends
| Type | Description |
|---|---|
| Cash Dividend | Direct payment to shareholders |
| Stock Dividend | Additional shares instead of cash |
| Special Dividend | One-time extra payment |
| Property Dividend | Assets other than cash (rare) |
Important Dividend Dates
- Declaration Date - Board announces the dividend
- Ex-Dividend Date - First day stock trades without dividend
- Record Date - Must own shares by this date to receive dividend
- Payment Date - Dividend is paid
Ex-Dividend Date Rule
To receive the dividend, you must buy the stock BEFORE the ex-dividend date. On the ex-date, the stock price typically drops by the dividend amount.
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Common Stock
Common stock is a security representing ownership in a corporation, giving shareholders voting rights and potential dividends.
Preferred Stock
Preferred stock is a hybrid security with features of both stocks and bonds, offering fixed dividends and priority over common stock in liquidation.
Ex-Dividend Date
The ex-dividend date is the first day a stock trades without the right to receive the next declared dividend. To receive the dividend, you must own the stock before this date.
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