What are Dividends?

Dividends are the portion of a company’s profit that is distributed to its shareholders. If you own shares of a company that pays dividends, you receive money periodically without having to sell your shares.

How does it work?

  1. The company makes a profit in the quarter/year
  2. The board decides to distribute part of that profit
  3. Those who held shares on the “ex-date” receive the dividends
  4. The money is directly deposited into your brokerage account

Dividends in many countries

  • They are exempt from Income Tax for individuals
  • Companies are often required to distribute at least a portion of their profit
  • Sectors that pay the most: banks, electricity companies, telecommunications

Practical example

If you own 100 shares of a company that pays $0.40 per share in dividends:

  • You receive: 100 × $0.40 = $40.00
  • Without selling any shares
  • Without paying taxes

Dividend strategy

Many investors build portfolios focused on dividends to generate passive monthly income. With $100,000 invested in good payers, it’s possible to receive $600‑$1,000/month.