What is a stock dividend?

What Is a Stock Dividend: A stock dividend is a dividend paid to shareholders in the form of additional shares in the company. Stock dividends are not usually taxed, increase the shareholder’s stake in the company, and give them the choice to keep or sell the shares; they also dilute the value of existing shares.

A dividend on common stock is a sum of money sent to owners of common stock from the company’s profits. The payment is made in the form of stock or cash, much like regular dividends. The amount of the dividend on common stock may be governed by law, especially if it is paid out as a cash distribution that would otherwise constitute a liquidation.

Stock dividends explained

Dividends might best be understood as a perk or incentive that comes with owning stocks. You receive a dividend for each share of stock you own; dividends are calculated as a percentage of the company’s profits.

Investors may get their dividends as cash payments or as new equity shares. Investors get dividend payments from firms on a quarterly basis, however, some may choose to pay out annual dividends.

Which companies pay dividends?

Dividend stocks are not all equities. Businesses have the option of paying investors dividends or not.

Dividends are typically linked to bigger, more reputable businesses with a track record of consistent profits. Companies that pay dividends include Apple (AAPL), Microsoft (MSFT), AT&T (T), and Exxon Mobil (XOM).

Companies may choose to reinvest their income in order to support growth when they choose not to pay dividends. Alternatively, some businesses can decide to just hoard cash from profits.

Benefits of investing in dividend stocks

A compelling argument may be made for allocating a portion of your portfolio to dividend-paying stocks. Dividends are a form of income that can be reliable throughout the long and short term when a financially stable corporation gives them. If you need to hold onto your dividend income for a while, you can reinvest it in more shares of stock.

Alternatively, you can choose to accept the dividends as cash income. This allows you to expand your portfolio. Reinvesting cash dividends can be a cost-effective investment strategy, as most corporations do not impose fees on this process.

Since 1972, dividend equities have historically produced the strongest returns in comparison to other stocks. They are also less volatile, meaning they are less vulnerable to the detrimental effects of market fluctuations between highs and lows. This implies that dividend stocks have the potential to serve as a hedge against market volatility, or its ups and downs.

As with any investment, there is risk involved when buying dividend stocks. It is beneficial to have a reliable counsel you can consult while selecting dividend stocks for your portfolio. Give us a call at 1-888-SYNOVUS (1-888-796-6887) to speak with a Synovus financial consultant about your dividend and investing inquiries.

What Is a Stock Dividend? Complete Explanation!

What is a stock dividend?

Stock dividends explained

Which companies pay dividends?

Benefits of investing in dividend stocks

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