What’s a dividend? – M.J., Santa Rosa, Calif.
It’s a payment that many companies make to shareholders out of their earnings. If Dodgeball Supply Co. (ticker: WHAPP) earns $2 per share in profit, it might decide to issue $1 annually to shareholders, using the balance in other ways, such as building its business or paying down debt. It will probably pay out 25 cents per share every three months. This may seem like peanuts, but it adds up. If you own 400 shares of a company that’s paying $1.50 per share in annual dividends, you’ll get $600 per year from the company. Plus, healthy companies generally increase their dividend amounts periodically. You’ll often see a dividend expressed as a yield. A company’s dividend yield is its annual dividend divided by its current stock price.
FOOLISH TRIVIA
Based in New York, I rake in more than $30 billion annually via cable network programming, filmed entertainment, television, direct broadcast satellite television, publishing, and more. My brands include Twentieth Century Fox, The Wall Street Journal, Fox News, British Sky Broadcasting, FX, SPEED, FUEL TV, Big Ten Network, HarperCollins, Dow Jones Newswires, Barron’s, MarketWatch, SmartMoney, New York Post, The Times, and scores of newspapers and TV stations. I bring you “Glee,” “Modern Family” and “American Idol.” Who am I? Last Week’s Trivia Answer: Wells Fargo.
THE MOTLEY FOOL IS WRITTEN BY TOM AND DAVID GARDNER FOR UNIVERSAL PRESS SYNDICATE.
JOIN THE DISCUSSION | Register here
We welcome comments. Please keep them civil, short and to the point. ALL CAPS, spam, obscene, profane, abusive and off topic comments will be deleted. Repeat offenders will be blocked. Thanks for taking part — and abiding by these simple rules. A thorough explanation of rules of conduct can be found in our Terms of Service. If you have any questions, including why your comment may not be showing immediately after you submit it, be sure to visit the commenting FAQ.