how do dividends work 
dividends are the percentage of a company s earnings that is paid to its shareholders as their share of the profits dividends are generally paid quarterly with the amount decided by the board of directors based on the company s most recent earnings dividends may be paid in cash or additional shares when a company announces a dividend it also will announce the payment date on which the dividend will be paid into the shareholders accounts the dividend yield of a stock is the dividend amount paid per share and is expressed as a percentage of the company s share price such as 2 5 1not all companies pay dividends to the owners of common shares owners of preferred shares are guaranteed a set dividend payment investopedia julie bangunderstanding dividendsdividends must be approved by the shareholders by voting rights 2 although cash dividends are common dividends can also be issued as shares of stock various mutual funds and exchange traded funds etfs also pay dividends a dividend is a reward paid to the shareholders for their investment in a company and it usually is paid out of the company s net profits some companies continue to make dividend payments even when their profits don t justify the expense a steady track record of paying dividends makes stocks more attractive to investors common stock shareholders of dividend paying companies are eligible to receive a distribution as long as they own the stock before the ex dividend date this is essentially a cutoff date for assigning the dividend payment when shares change hands dividends are paid on a schedule picked by the board they may be paid monthly quarterly or annually for example walmart inc wmt and unilever ul make regular quarterly dividend payments 34companies can also issue non recurring special dividends either individually or in addition to a scheduled dividend united bancorp inc declared a 15 cents per share special dividend on feb 23 2023 5dividend paying companieslarger established companies with predictable profits are often the best dividend payers companies within the following industry sectors maintain a regular record of dividend payments companies structured as master limited partnerships mlps and real estate investment trusts reits are required to make specified distributions to their shareholders 67funds may also issue regular dividend payments as stated in their investment objectives young fast growing companies such as those in the technology and biotechnology sectors may not pay regular dividends since they may be in the early stages of development and retain all of their earnings for research and development business expansion and operational activities investors tend to forgive the lack of a dividend if the company s stock price is growing rapidly not surprisingly once a company begins paying dividends it finds it difficult to reduce or suspend the payments this is seen as a sign of falling profits not to mention a loss of income to shareholders important dividend datesdividend payments follow a chronological order of events and the associated dates are important to determining which shareholders qualify to receive the dividend payment 