When people think about investing in stocks, they often imagine making money when share prices rise. But there’s another powerful way to earn: dividends.
In this guide, we’ll explain what dividends are, how they work, and the key dates every investor should know. Let’s dive in! 👇
✅ What Are Dividends?
Dividends are payments a company makes to its shareholders from the profits it earns.
If you own shares, you’re a co-owner of the company, and dividends are your share of the profits.
📌 Simple Example:
Imagine you have 100 shares of a company that pays $2.000 CLP per share in dividends.
- You’ll receive $200.000 CLP in cash just for holding those shares.
- This payment is independent of whether the stock price goes up or down.
✅ Types of Dividends
- Cash Dividends 💵 – Money deposited into your account. The most common type.
- Stock Dividends 📊 – Instead of cash, you receive more shares of the company. (In Chile, these are also called “crías.”)
- Special Dividends 🎁 – Additional payments when the company has exceptional profits.
✅ Why Do Companies Pay Dividends?
- Reward shareholders: A way to share success.
- Attract investors: Companies that pay dividends are often more appealing to those seeking stable income.
- Signal confidence: Indicates the company is financially healthy.
✅ Key Dates You Need to Know
To know when you qualify to receive a dividend, you must understand these dates:
- Declaration Date 🗓️ - The day the company announces the dividend amount and payment schedule.
- Record Date 📒 - The day the company checks its shareholder list. If you’re on the list on this date, you’ll receive the dividend.
- Ex-Dividend Date ❌ - Usually one business day before the record date. If you buy shares on or after this date, you won’t receive the dividend.
✅ To qualify, you must buy before the ex-dividend date. - Payment Date 💰 - The day the dividend is paid to shareholders.
- Cash Amount 💵 - The amount per share that will be paid.
📌 Example Timeline:
- Declaration: March 1
- Ex-Dividend: March 10
- Record: March 11
- Payment: March 25
If you buy on March 9, you get the dividend. If you buy on March 10, you miss it.
✅ Benefits of Dividend Investing
- Recurring income: Ideal for supplementing your salary or planning retirement.
- Lower risk and volatility: Dividend-paying companies tend to be more stable.
- Long-term strategy and compounding growth: Reinvesting dividends accelerates portfolio growth.
🌟 Conclusion
Dividends are a powerful tool for generating passive income and building long-term wealth. If you’re looking for stability and consistent cash flow, investing in companies that pay dividends can be an excellent strategy.