A dividend is money paid to investors in a company. Some companies choose to pay dividends while others do not. Historically, dividends are paid on a quarterly or annual basis. However, some companies choose other payment structures.
Dividend Rate
The dividend rate is the dollar amount per share of the most recent dividend paid.
Dividend Yield
The dividend yield is a percent yield calculated by taking the indicated dividend rate and dividing it by the current stock price, multiplied by 100.
Considerations
Deciding whether to purchase stock in a company that pays dividends is up to the investor. Receiving a dividend is good for the investor because it provides a guaranteed return on investment. However, companies that offer dividends are generally well-developed companies with smaller growth potential. Furthermore, a company that offers dividends does not use that money to reinvest into the company, thereby further limiting growth potential. As a result, stock in companies that offer dividends often provides smaller returns to the investor.
