When stocks pay dividends how do they pay them?

[imported_NOTORIOUS]

When stocks pay dividends how do they pay them?

Do they send a check or some other way?

 

[DaveSimmons]

If you buy directly from some companies with DRiPs (Dividend Reinvestment Programs) the dividends are automatically used to buy fractional shares of the stock.

If you have a brokerage account they add to the cash balance in the account.

With mutual funds what most people do is tell the brokerage to automatically reinvest them and you end up extra fractional shares of the fund like with a DRiP.

 

[FoBoT]

there are different options depending on if you have your stock held by a broker or you have paper certificates

either they send you a check or reinvest or put the money into your brokerage account

 

[PokerGuy]

Oh boy.... me thinks that if you don't know how dividends work, you should probably not be investing 😉

Actually companies declare dividends, some regularly, some do it at certain times for capital management reasons. Lets say you have 50 shares of IBM common stock in your brokerage account. If IBM declares a dividend of $1 per share, you'd just see $50 in your account in cash, and on your statement it would say something to the effect of "ordinary dividend xx/xx/xxxx" etc.

 

[vi edit]

Really depends on how it's set up.

You can "DRIP" them which means that instead of actually receiving money, you receive shares equal to your dividend value. Some stocks you can register directly with the company to do this, otherwise it has to be supported by your stock broker.

Typically though, the dividend is just paid in cash to your brokerage account. You can elect to receive a check for the dividends if you ask your broker to do that instead.

 

[imported_NOTORIOUS]

By the way I'm using scottrade

 

[spidey07]

Originally posted by: FoBoT
there are different options depending on if you have your stock held by a broker or you have paper certificates

either they send you a check or reinvest or put the money into your brokerage account

Dividend re-investment FTW!!!!

 

[drnickriviera]

Originally posted by: NOTORIOUS
By the way I'm using scottrade

It will be deposited into your scottrade cash balance

 

[DaveSimmons]

Originally posted by: NOTORIOUS
By the way I'm using scottrade

Have you thought about getting stock index mutual funds instead of individual stocks?

An S&P 500 index fund like Vanguard's VFINX gives you instant diversification since you own fractional shares of 500 different stocks for each share of the fund. You can buy the fund in round dollar amounts instead of by share, and almost all mutual funds do support automatic reinvestment of dividents (there is no trading fee for this).

Index funds are "passive" funds that don't use stock pickers to choose "hot" stocks they just buy and hold the funds that are listed in the index. S&P 500 index funds outperform even most professional stock pickers.

(No I don't work for Vanguard 🙂 )

 

[everman]

Originally posted by: DaveSimmons

Originally posted by: NOTORIOUS
By the way I'm using scottrade

Have you thought about getting stock index mutual funds instead of individual stocks?

(No I don't work for Vanguard 🙂 )

Why haven't they changed your title to VFINX yet? 😛

 

[DaveSimmons]

Originally posted by: everman

Originally posted by: DaveSimmons

Originally posted by: NOTORIOUS
By the way I'm using scottrade

Have you thought about getting stock index mutual funds instead of individual stocks?

(No I don't work for Vanguard 🙂 )

Why haven't they changed your title to VFINX yet? 😛

😀 they can't decide between VFINX and FLAC 🙂