What Is a Dividend?
A dividend is a cash payment a company makes to its shareholders from its profits. Not all companies pay dividends — but many established, profitable companies do (think banks, utilities, consumer staples).
Key Dividend Terms
| Term | What It Means |
|---|---|
| Dividend Yield | Annual dividend ÷ Stock price. A 3% yield = $3/year per $100 invested |
| Ex-Dividend Date | You must own the stock before this date to receive the dividend |
| Pay Date | When the dividend is deposited into your account |
| Payout Ratio | % of earnings paid as dividends. Above 80% can be unsustainable |
| Dividend Growth | Companies that grow dividends annually are highly valued |
What Makes a Good Dividend Stock?
- Consistent dividend history (5+ years of payments)
- Payout ratio below 60–70%
- Growing revenue and earnings
- Low to moderate debt
- Dividend yield between 2–6% (very high yields can signal risk)
A Simple Dividend Investing Strategy
- Use the Stock Screener to filter for Dividend Yield > 2%, Payout Ratio < 70%, positive EPS
- Check the balance sheet for manageable debt
- Look at 5-year dividend history — is it growing?
- Add qualifying stocks to your Watchlist
- Monitor ex-dividend dates in the Dividend Calendar
Warning Signs to Watch For
- Dividend yield above 8–10% — may signal the company is in trouble
- Payout ratio above 80% — dividend may not be sustainable
- Declining revenue while maintaining dividend — often unsustainable
- Rising debt levels combined with flat earnings
