how do dividends work?
- Thread starter 4444
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If a stock has a declared dividend, it will have an "ex-dividend" date, which means that if you own the stock the night before this ex-date, you will be paid the dividend amount x the number of shares you own. The payment will come in a couple weeks after the ex-date.
Don
Don
Most companies pay a quarterly dividend amount. Dividend yield is adding all 4 up to make an annual divident amount which you divide into the current price to determine the current yield.
(Might be an interesting side note that I tell all my traders).
Dividend yield is often the reason we see longer term support and resistance prices on a stock. If a stock pays a $1.00 per year dividend, when the stock $15.00 that's 6.6% yield (minus cost of carrying the stock), when the stock hits $20.00, the yield is 5%, so not as good a yield, thus a support at $15 and some resistance at $20.
There has been a lot of discussion about whether it's better for the company to pay out their profits in dividends to the shareholders, or keep the money and thus increase the valuation of the stock (book value and hopefully price to book). It really depends on the company, and the investor's needs, IMO.
Don
