What are Dividends? What do I need to Know About Dividends?

I have been on a ridiculous dividend kick lately, but I never gave thought to those that don’t fully understand where Dividends actually come from and what they are.  I don’t usually get into these info-graphics but this one is fantastic.  It explains:

  • What is a Dividend?

  • What are Retained Earnings?

  • Who Decides When Dividends will be Paid?

  • Important Dates regarding Dividends?

(you may need to click the picture to enlarge)

Created by Mint.com Personal Finance Software. I was not paid by Mint to put together this post I just really liked the graphic.

12 Responses to What are Dividends? What do I need to Know About Dividends?

  1. When I first bought stocks, I always thought dividends were an extra bonus, so I only bought stocks with dividends. But then I realized that dividends is money taken from their profits and distributed to stock holders… it could’ve been used to reinvest in other parts of the business.

    • REITs could be a great addition to someone’s portfolio. Just like anything else there are great REITs and Horrible REITs depending on one’s goals and objectives.

      There are some REITS that basically have DCSC which could be a shocker if not explained correctly

    • I’m with you bro!

      Love the high dividends. If they stop no big whoop! I will consider it a fun ride as long as it lasts…

      I have to put your Roth IRA

      • Drat, my laptop became possessed and submitted my comment before I was finished!

        I was saying, “I have to put your Roth IRA video on my next Saturdays’ Funny Money post”!!!

  2. Wow! That is an amazing infographic! Congrats on your dividend obsession- it’s a healthy obsession. I agree with you evan- I like dividend paying companies. It shows accountability.

    People who are on the fence about dividend investing should read the Intelligent Investor :)

  3. I wish all companies that had net profit of some sort would, by law, be required to pay some of the profit back to the shareholder

    • I don’t. Some companies are best to reinvest their profits back into the company. Paying out a dividend would be an inffective way to maximize shareholder value.

      I would rather pick my stocks based upon what I’m looking for.

      The other option is stock buybacks (which don’t have tax issues for you unlike dividends)

      • I oversimplified my previous response.

        I don’t expect companies that are starting out to pay shareholders, perhaps the distributions of dividends should be based on executive pay percentage over a certain number (hey, I actually like the idea of this ratio as a yardstick).

        That said, I believe the majority of publicly traded companies over compensate their executive staff by too much! In these times, if you are a CEO and make 60+ million, and the company you steer doesn’t pay a divided, then that’s just flat out wrong. I mean come on, that’s just plain highway robbery!

        I’m pro-business, but such companies are taking advantage of common shareholders (common because preferred get their cut, but preferred shareholders are a more sophisticated group…)

        As an investor, surely you see the problems with CEO and other big wigs of the companies getting richer and richer at the expense of common stock shareholders?

        Now I don’t have the same beef with privately held companies such as Fidelity! They are not taking and getting rich at the expense of shareholders…

        Just my 2 cents :)

  4. Hi-Cool graphic. Dividends are great sources of income, but when you are checking out stocks, don’t forget to look at the underlying fundamentals of the company, and the firm’s ability to grow and maintain or increase it’s dividends. I purchased Nokia at $30, and although it still pays a great dividend, the capital loss of 66% kind of offsets the gain from the divs :) (thanks for the comment on the insurance post, I fished it out of spam-I like controversy)

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