What is Dividend?
A dividend is a portion of a company’s profits paid out to shareholders, usually in cash and on a regular schedule. It is one way investors earn a return from owning stock.
Example
A company paying a $2 annual dividend on a $50 share gives shareholders a 4% dividend yield, on top of any change in the share price.
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Related terms
Compound Interest
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Over time it produces exponential growth, which is why it is central to long-term investing.
Mutual Fund
A mutual fund pools money from many investors to buy a professionally managed portfolio of stocks, bonds, or other assets. Investors own units proportional to their contribution.