how do dividends work?

Discussion in 'Trading' started by 4444, Aug 22, 2007.

  1. 4444


    How do they work. I have 2,000 to invest and I was wondering how the dividen yield relates to how much i am going to get. Do I get the dividens each month or quarter. Thanks a lot!!!
  2. 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.

  3. 4444


    Thank you Mr. Bright for your timely advice. Nice domain by the way. That has to be worth a lot!
  4. 4444


    so do I get the dividend yield X number of shares once a quarter or is this once a year but the dividend yield is divided by 4 each quarter?
  5. 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.

  6. Don't think you'll really profit on dividends.

    Most stocks never pay dividends. The few ones that do pay 3% yearly, if that.

    Besides it is very possible that you receive a hefty dividend, yet the stock plunges in price, more than the dividend received, resulting in a net loss.
  7. 4444


    I plan on purchasing some kraft shares for the long-run 4+ years.
  8. lindq


    FYI, a company can change, or delete, their dividend at any time. So a long term investment based on a dividend expectation may not be what you will expect.