📈 Stocks & Equities · Lesson 5 of 9 · 10 min
Dividends — Getting Paid to Hold
💸 Some stocks just… mail you cash every three months for doing nothing but owning them. It's the closest thing to free money that isn't a scam — which, if you've been paying attention, is becoming a theme around here.
💡 Key idea
Dividends = cash for owning. Reinvested = compound wealth.
🧠 Why it matters
Dividends are usually quarterly cash payments to shareholders. Own 100 shares of a $2/year dividend stock = $200/year — for as long as the company keeps paying it (dividends can be cut).
🌍 In the real world
🏆 Johnson & Johnson has raised its dividend every year for 60+ years. $10,000 in 1980 with dividends reinvested is worth several million dollars today.
📌 Takeaways
- Quarterly cash payments
- DRIPs auto-reinvest dividends
- Best for retirement income
📖 Terms in this lesson
Dividend: Cash a company pays its shareholders out of its profits, usually every quarter.
✅ Test yourself
Most dividends paid how often?
- Daily
- Monthly
- Quarterly
- Yearly
Answer: C · Quarterly
Most US companies pay dividends quarterly — four times per year.
You own 200 shares paying $3/year each. Annual dividend income?
- $60
- $200
- $600
- $1,200
Answer: C · $600
200 shares × $3 = $600 per year, just for holding the stock. Reinvest it and it compounds.
What does a DRIP do?
- Slowly sells your shares
- Auto-reinvests dividends into more shares
- Pays dividends in cash only
- Drips water on plants
Answer: B · Auto-reinvests dividends into more shares
A Dividend Reinvestment Plan automatically buys more shares with your dividends — compounding without you lifting a finger.
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