What is the difference between dividends and yields

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This site does not include all companies or products available within the market. This may be a cash payout in the form of a dividend check, or it may be additional stock in the company. Dividends are decided by the company's board of directors and are drawn on that company's returned earnings account, which is reduced by the amount of the dividend paid.

There are two common ways of describing a dividend. The first, called the dividend rate, is the dollar amount of the annual dividend declared. Note that many companies issue dividend checks quarterly. In that event, the dividend rate is the total of the dividends paid for the four quarters of its fiscal year.

The second way of describing the dividend, called the dividend yield, results from a simple calculation:. When 3. The company's dividend yield is 4. When you're considering investing in dividend-paying stocks, you're almost certainly more interested in their yields than their rates. If you're retired and hold a percentage of your retirement funds in dividend-paying stocks, your immediate interest may be in the total amount of dividend income you're slated to receive, which is the total of all stocks' dividend rates.

That's the money you're planning to live on for the next 12 months. When shopping for dividend stocks, it's important to keep in mind that a high dividend yield alone doesn't make a stock a great investment.

To the contrary, a yield that seems too good to be true very well could be. There are several things you should consider before buying any dividend-paying stocks, including but not limited to :.

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