Dividend
A share of a company's profits paid out to the people who own it.
One of the two ways an investment pays you. The other is capital growth — the holding itself becoming worth more.
Dividends are money arriving while you own the thing, typically a few times a year. Not all companies pay them; many growing companies reinvest profits instead, which is not worse, just different.
What matters most for long-run outcomes is whether dividends are reinvested. Paid out and spent, they are income. Reinvested, they buy more units which themselves pay dividends — which is compounding doing its work.
A high dividend yield is not automatically good news. It sometimes means the price has fallen sharply, which is a different signal entirely.
Words on this page
- Share — A small piece of ownership in a company, including a claim on its profits.
- Capital growth — An investment becoming worth more than you paid, so selling it later returns more.
- Compound interest — Interest earned on your interest, so growth accelerates instead of staying flat.
Related terms
Covered properly in Learn.