To The Moon

Hey, tigers

Last week, one tiger shared her understanding of the dividend. You can review it at the end of this article.

In the following articles , I will share something more in details about the dividend.

So, if you want to live on dividends, there are many basic things you need to understand first.

🤔 First of all, we should know the definition of the dividend.A dividend is a payment from a company to its shareholders, giving them a portion of the company's earnings.

For most stock market investors, their returns generally come from two ways: One is capital gains, realized through the sale of a share at an increased price. For example, if you buy a $Tesla Motors(TSLA)$ at $800 per share and sell it at $1000, the capital gains will be $200 ($1000-$800) per share.

The other is dividends. For many companies with profits, they can use part of their earnings to reward shareholders, and such distributed profits are known as dividends.

Then, why are companies willing to pay dividends to shareholders?One reason is that it makes a company more attractive to investors because that generally showcases the company's muscle-financial position.

Dividends can be paid quarterly and in cash. However, companies don’t have to pay dividends — Depending on their financial position or plans, they might reinvest earnings, for example, Buffett don't like give dividends to shareholders just because he can earn more profits for shareholders.

After that, what kinds of company can pay you dividends?——mature companies, not earlier stage ones.

Because younger companies may still be in a growth phase, they tend not to pay dividends. For example, if a company just created effective vaccines, the short-term goal may be to market it to new clients, so the company might invest in hiring more salespeople rather than paying a dividend to shareholders.

Want to receive the dividend? You should know how dividends work for you.

At the time specified by the company, each shareholder of record is entitled to the dividend. Typically, shares that you own are actually held by your brokerage company, so the brokerage accepts the dividend payment on your behalf and distributes it to your account.

There are four important dates regarding dividends: the declaration date, the record date, the ex-dividend date, and the payment date.

• Declaration Date: It’s an announcement by the company’s board of directors about a dividend’s amount, date of record, and payment date.

• Ex-Dividend Date: Circle this date on your calendar. If you haven’t bought the stock by this date, you will not receive the dividend. Since settlement of stock purchases typically takes two days, the ex-dividend date is the day before the record date. You must buy shares prior to the ex-dividend date to get the dividend.

• Record Date: This is the date on which you need to be a shareholder to get the dividend that was declared.

• Payment Date: This is when a dividend will be paid to eligible shareholders. Depending on the instructions you left with your brokerage account, the money could either appear as cash in your account or be reinvested in the company that issued the dividend.

So, if you want to live on dividends, you should understand the meaning of dividends first and remember related dates.

Next, we will continue to talk about the option.

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