A dividend is a payment to a shareholder when a company shares its profits. The amount of dividends you receive will be proportional to the amount of stock you own in that company. Learn more about how dividends work in this article.

Companies may pay dividends, but they are not required to. Generally, larger, more established companies tend to pay dividends, although they are not the only ones that do.

Dividends are usually paid in cash (not additional stock), and will be deposited into your Personal Portfolio Cash or will be automatically reinvested. If you received a dividend and aren’t sure what to do next, check out this guide.

Note: Dividends paid on investments held in your Smart Portfolio, Retirement Portfolio, and any Custodial accounts will be reinvested in the account in which they were earned.

Not all companies or investments pay dividends, but there are some that are known for their consistent payments. You may earn dividends on stock from individual companies, or from an ETF that holds multiple dividend-paying companies.

Not sure where to start? Our guides on getting started with dividend stocks and how to leverage them for the long term are great resources.

Dividends are usually paid on a quarterly basis, but the timing depends on the company’s board of directors. Learn more about payment frequency in this guide.

Important dates to remember:

• Declaration date: This is when the next dividend payment is announced by the company.
• Record date: This is when the company looks at its records to see which shareholders are eligible for the dividend.
• Ex-dividend date: After this date, you can no longer purchase the stock and receive the upcoming dividend. The ex-dividend date is typically the second business day before the record date. If you want to receive a dividend payment for a particular stock, you need to purchase it at least three business days before the record date. This is because it takes three business days for a stock purchase to be settled and officially put on the company’s books.

Good to know

Dividend-paying securities purchased too close to the payment date are not considered “qualified dividends” and are taxed at a higher rate.

No. Many companies have a long, reliable track record of paying dividends, but no company is required to pay them.

Dividends are a subset of revenue generation and profitability. Because these factors cannot be guaranteed, dividends are also not guaranteed.

However, many companies and investment funds with a mandate to pay dividends have done so for decades (and pride themselves on it).

If you are looking to invest in a company or ETF that pays dividends, you can check out historical dividend data of various companies or funds to get a better sense of what to expect.

You can use tools like NASDAQ’s Dividend History page to help you do your research.

DRIP stands for Dividend Reinvestment Program. It’s a way to automatically reinvest dividends you earn from stocks or ETFs back into additional shares of the same investment. This helps your portfolio grow over time through compounding.

You can learn more about DRIP here: Dividend Reinvestment Plan (DRIP).

Dividends are automatically reinvested in your Smart Portfolio, Retirement, and Custodial accounts. For your Personal Portfolio, you can toggle DRIP on or off in your account settings.

There are a number of reasons dividends may not be reinvested:

• The equity is ineligible for dividend reinvestment.
• The dividend was voided or reversed.
• The market is closed, in which case your dividend will be reinvested on the next trading day.
• You enrolled in our dividend reinvestment program after your investment’s record date.

For Smart Portfolios, Retirement accounts, and Custodial accounts, we’ll automatically reinvest your dividends for optimal growth. Dividends may take up to 3-4 business days to be reinvested.

If you’d like to start reinvesting your dividends in your Personal Portfolio, follow these steps:

Depending on the amount of dividends you receive, you may need to report them on your taxes.

If you receive a total of $10 or more in dividends in a calendar year, you’ll receive a 1099-DIV form to file along with your taxes.

Have specific questions about dividends and taxes? Please consult a tax professional.