Lesson 3 of 5 · 4 min read

Dividend & yield

Companies that pay you to be a shareholder.

What is a dividend?

A distribution of profit to shareholders, usually per quarter. Some companies have raised it every year for decades.

Dividend growth: companies that raise their dividend year after year are often stable and profitable.

Dividend yield

Yield = annual dividend ÷ price. With a €2 dividend on a €50 stock, the yield is 4%. Watch out: a very high yield can be a red flag.

Dividend growth: companies that raise their dividend year after year are often stable and profitable.

Stocky says

A yield of 12% sounds great, but it often arises because the price has crashed — the market expects the dividend to be cut soon. A yield that's 'too good' is usually a warning, not a gift.

Reinvesting = compound

Automatically reinvesting dividends buys more shares, which in turn pay more dividends. Compound on top of compound.

Reinvested dividends buy more shares that compound over time.

Remember this

A dividend is a distribution of profit to shareholders, often per quarter.
Yield = annual dividend ÷ price; €2 on €50 = 4%.
An extremely high yield is usually a warning (crashed price), not a gift.
Reinvesting dividends stacks compound on compound: more shares → more dividend.

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