Stock Dividends - Easy Money In The Stock Market?
What is the best part of investing in the stock market? If you said, “making money”, you’re right! What kind of money is the best to make? If you said, “easy money”, you’re right again. The only thing better than making money in the stock market is making EASY money in the stock market! Everyone wants to know how to do this and the answer is simple; the easiest way to make money investing in stock is through stock dividends.
Stock dividends occur when a company decides to distribute a part of its profits to the shareholders. Notice I said “a part of its profits”; let’s face it, companies are not benevolent souls that want to lavish gifts on others! Companies are, however, created to make profits for their owners. The remaining money is generally used to reduce debt or make acquisitions that will help the company grow. Wise money management is what makes these companies attractive to investors, helps them to grow and encourages them to pay stock dividends.
Companies are not forced to pay dividends. If times are bad and the company is faced with struggling stocks, it can skip paying a stock dividend. For many companies, this is viewed as a last resort because the negative publicity that is generated to forego a stock dividend is usually more harmful than actually paying the stock dividend would be. The company’s board of directors announces the stock dividend on a per share basis; if the company announces a $0.25 per share dividend, the 1,000 shares you own would generate a $250 payout, which represents the return on investment.
When discussing stock dividends, there are several important dates to remember:
- The Declaration Date – The Declaration Date is when the board of directors announces the amount of the stock dividend and when checks will be received. The board also announces the Ex-Dividend Date at this time.
- Record Date – This is the date when the company finalizes the list of shareholders that will receive the stock dividend. This date works in conjunction with the Ex-Dividend Date.
- Ex-Dividend Date – This date usually occurs 2 to 4 days prior to the Record Date and it is the actual cutoff date for stock dividend recipients. On this date, the stock market reflects a lower price since the dividend is no longer available.
- Payment Date – This is the day that the checks are in the mail for the stock dividends. This date is usually about two weeks after the Record Date.
There are actually two types of stock dividends. These stock dividends are either fixed or variable. Fixed dividends are only paid to the holders of preferred stocks while the variable dividends are paid to those who have common shares in their stock portfolio.
Stock dividends are the easiest way to make money in the stock market since all you are doing is collecting a profit from something you already own. Companies that consistently pay dividends are the foundation for investors who believe in value investing and hold a conservative portfolio. Don’t be afraid to make some easy money, select companies that pay out stock dividends!