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How Investing Works: Dividends

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Dividend investing isn't as popular as it used to be. But investors looking for a low-risk investment strategy might want to pay more attention. You might remember the "Bank pays you dividend of $50" card from Monopoly, but what is a dividend? A dividend is a portion of a company's profits paid out to shareholders on a quarterly basis. As long as you own the stock you'll continue to get paid and over time these regular payments add up. » Subscribe to CNBC: http://cnb.cx/SubscribeCNBC About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: http://cnb.cx/LikeCNBC Follow CNBC News on Twitter: http://cnb.cx/FollowCNBC Follow CNBC News on Google+: http://cnb.cx/PlusCNBC Follow CNBC News on Instagram: http://cnb.cx/InstagramCNBC #CNBC How Investing Works: Dividends
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Text Comments (233)
CNBC (15 days ago)
Have you made money off of a dividend stock? Tell us your experience.
Corey Jordan (13 days ago)
Don't ever buy a stock, if it doesn't paid a dividend. That is bad investment. Only buy and purchase dividend paying stocks.
hoherspatz (19 days ago)
Here in Germany when the automobile industry is making good profits, they pay their workers up to 5000 €, depend on the manufacturer
Business Knowledge (19 days ago)
In America they pay their shareholders and executives more money.
Money Games (26 days ago)
If you dont invest you will have you spend your entire life working!
No Thoughts Barred (29 days ago)
I like dividends. A company that pays them is telling me it's confident in its investors and business model. A nice thank you and incentive to buy.
Lexer Can (1 month ago)
Well done CNBC. Good videos lately
Abhishek Varma Buddharaju (1 month ago)
Love the content CNBC is creating. Looking forward for more
4RealKev (1 month ago)
Didnt at n t go out business for a while sooooooooo explains that part
Air Crash (1 month ago)
Why do they tax dividends ?
hbarudi (1 month ago)
When it comes to investing, statistics is king.
IllestGaming (1 month ago)
To make a long story short, I shoved a whole bag of jelly beans up my a$$
kawola17 (21 days ago)
How did it feel.
Commando Master (1 month ago)
Dividends are great. You get paid for sitting around waiting for the stock price to go up.
Business Knowledge (19 days ago)
Reinvest your dividends so you get more money in dividends.
Нанотехнологии (1 month ago)
US Dollars have reduced in their value significantly since 2003, so your statements are wrong.
S Migliore15 (1 month ago)
This video lays it out so nicely
One in a trillion (1 month ago)
So dividend payout has been at around 2% for the last two decades? Isn't that how much a CD is paying out but a CD is supersafe. Stocks have risks but also rewards but mostly risks. You never know when the market might come crashing down again like in 2009. If it's money you can't afford to lose, then don't take risks in the stock market. Buy a CD instead.
Tinker Tanner (1 month ago)
No, dividend payout has not been 2%.
Jerome 092 (1 month ago)
Dividends are great for long term, If i invest lets say 10,000 on att which has one of the highest dividends payout 6 something %. 10k would get you like 333 stocks and each stock pays you 0.51 cents thats $170 every quarter which is $680 a year. That bad but you wont get rich from it and in order to lay your bills you would need to invest a lot more than that.
No Thoughts Barred (29 days ago)
Reinvest the dividends. Compound interest!
Jason Robinhood (1 month ago)
We have to talk about stock splits @Coloredspaces
Anish Sharma (1 month ago)
When companies paid divided's they grew slow, by self investing profit they grow fast, which does sound good, but if something goes up to quickly it may come down same. People get cocky if you get too much in too little time same with companies.
Ryaken (1 month ago)
Average investors manage risk by having a diverse portfolio. Novice/Great investors pick a few stocks. The latter does does extensive research on their investments to greatly increase their odds of success.
D. A. (1 month ago)
Dividend investing is only worth it if you're buying billions of dollars in stock.
No Thoughts Barred (29 days ago)
Well obviously that is ideal but then most people don't have billions lying around. Investing in stable companies that pay dividends pays off in the long run due to compound interest. When you get paid the dividends you keep reinvesting them. If the yield increases over time the stock eventually pays for itself and you have free money coming in every quarter.
The Wealth Generator (1 month ago)
Dividends are great but they can be dangerous if a company becomes a dividend trap like L brands
Yutube SuspendedMyAccount (1 month ago)
The Wealth Generator and thats where diversify came in.....
wijaya47 (1 month ago)
Completely wrong. When multi-national company enslaves poor people in third world countries, they divide the poor people into the actual dividends. I own stock of many companies and recently received my own brown person in the mail. You can also do DRIP(dividend reinvestment program). This is to avoid taxes and to start your own slave colony over seas.
Anthony (1 month ago)
Best dividend stock is the S&P 500. This is because most great dividend stocks Ford, GE, Kraft are doing terrible the past five years this is because the stock price is the most important factor not the dividend and you need a dividend that has a reliable stable stock such as coke, S&P, etc
99,999,999 views (1 month ago)
This video is poorly researched
Frank Sanchez (1 month ago)
I only buy stocks that pay dividends companies like facebook and amazon are amazing companies but if they dont pay me then i cant invest i need that extra cash flow i rather see a check every quater then them buy stock back but i understand the taxes suck
Eric V (1 month ago)
Bull ! Scam!
Cry Whit (1 month ago)
Still confused.
Yash Sansaroje (1 month ago)
Can you make more videos on investment company please
Shahrooz Shadbakht (1 month ago)
Andrew Yang Freedom Dividend
Hemanth Kumar (1 month ago)
Dividend is biggest government fraud. Beneficiary is government. In india company pay for 100 rupee 35 tax and remaing 65 on its diatibution 35 % tax that is 23 tax paid by investor and balance 42 is investor getting its same around the world. What investor getting for 100 companies income tax is 58 and investor return 42 . Dividends is gold mines for government. Only investor is cheated by government in the name of corporate persolnality its only for government not for investor no one give you this calaculation.
Nicu Vrabii (1 month ago)
Awesome! Please post more videos on finance and investment 😃
The Hunt - North America (1 month ago)
Can I repost this video on my channel?
Itzik beja (1 month ago)
25 dollars minus 15 years of inflation... I disagree with the premise that the stock payed for itself.. if I understand what you say correctly..
VoltageLP (1 month ago)
I love AT&T I own AT&T
Ashley Sim (1 month ago)
Interesting video. I have long wondered why American stocks don't pay dividends. In Australia we have a system of dividend imputation. When you receive a dividend you get a credit for the tax the company has paid, stopping double taxation. And if your tax rate is nil (earning less than $18k) you actually get that back in your tax return. You think that system would work well and stop companies like Apple holding onto a massive amount of cash in tax havens and instead pay that to shareholders and further stimulate their economy.
Chris D (1 month ago)
Umm yes if they get rid of double taxation it would be a gigantic boom to the us economy. At least In the short run.
DINESH (1 month ago)
Dividends are lame ! I would rather invest in rental properties where I would get monthly cashflow instead of every 3 months
YuriSinclair (1 month ago)
You usually have to be leveraged tho going rental side of things
Chris D (1 month ago)
Also property taxes and property depreciation/ upkeep costs make this untenable for most Americans. There are other risks involved too like nonpayment of rent and even getting sued by your tenants. Meanwhile my portfolio grows at around 10% per year including dividends and I literally do nothing. The only risk is the occasional large market downturns, like what happened in 1999 and 2008. As a shareholder you are free from any liability and only pay a nominal tax on realized gains when you pull the money out!
Douglas Thompson (1 month ago)
If you had $1 million worth of AT&T stock at 6.5% dividend rate, you would be collecting $65,000 income each year without lifting a finger. If you had 10 rental homes worth $1 million total making you $500 a month each after expenses, you would be making $60,000 a year income. But you would be working for it. Even if the net profit was in the $75K-$95K range on the homes every year, I wouldn't want to deal with the tenant work hassle for an extra $10K-30K in profit. I'd rather sit at the beach and keep my phone on mute. Because you're actually working for the extra.
rowlandmartin85 (1 month ago)
I would like to see more detail in stock buybacks.
jooky87 (1 month ago)
Dividends are useful if you have a lot of money. $1 Million @ 3.8% dividend yield is $38,000/year. First get the $1 Million. Money makes money just like debt makes debt.
Business Knowledge (19 days ago)
+YuriSinclair Don't work for your MONEY. Make the MONEY work for you.
YuriSinclair (1 month ago)
Exactly, don't be a slave to money, let money be your slave!
TDC (1 month ago)
Just buy and sell
Chris Invests (1 month ago)
I just started my own channel on personal finance :)
Ratso Rizzo (1 month ago)
CNBC have been putting out great videos recently some good reporting well done!! 👏👏👏👍
Joshua Degreiff (1 month ago)
My best financial advice do the opposite whatever says NBC. Scientific proven when people do the opposite of NBC have better luck than fallow them.
Chris D (1 month ago)
I’m not sure any scientists are studying “nbc” stock picks.
Benjamin Buckley (1 month ago)
It's not double taxation because corporations are people my friends. If the corporate entity itself is it's own legal person then it pays income taxes and when that person gives it to you then you get taxed on your (not the corporations) income.
Dividend Driven (1 month ago)
Dividends are the jewel of investing. Every one of my ETF’s pay dividends.
Jalen D (1 month ago)
Which etfs do you have?
Bruce Lee (1 month ago)
RDIV is a good one
Alejandro Preciado (1 month ago)
Companys are more greedy I think the buybacks are keeping dividends lower. It isn't the government doing anything before 70's and 80's taxes were higher then they are today. Yet dividends are down much more then before the 70's and 80's.
Real Robs (1 month ago)
Buy 100 shares of a penny stock, every time he says dividends
Real Robs (1 month ago)
The best investor is one who puts money in penny stocks Jk
sujit meka (1 month ago)
do options
Realistic Man (1 month ago)
If you invested in Amazon or Apple in their early days, you wouldn't have given a damn about dividends...
Realistic Man (1 month ago)
+TimeVVaste both. At the end of the day, does it matter whatever you call it? As long as you make money consistently, I don't really care. I will continue to speculate on price, but in the past 5 years, that speculation has worked really well for me.
TimeVVaste (1 month ago)
+Realistic Man you mean investing or speculating on price?
Realistic Man (1 month ago)
+TimeVVaste I do investing in stocks for a living. You have your own theory and I respect that. Good luck with your investing. I have done well investing in high p/e stocks so far. You kind of sound similar to this co worker I used to talk to. He said he does not invest in stocks because he did not understand why he had to pay multiple times of a company's current earnings. He was a big fan of whole life insurance and pension. Anyway, good luck to you
TimeVVaste (1 month ago)
+Realistic Man That's like saying "oh youre saying too much food is bad? guess what people who dont eat enough perform even worse!" :D PE of about 15-20 is great, PE of 80 is just nonsense. Do you actully believe amazon can increase their earnings at least 5x after dominating whole world (if we assume competition in asia does not exit) so it becomes sort of fair value at current price? Its a joke. because this stock will NEVER pay off for itself :D AMzn hs to pay all their earnings for decades even after 5xing their revenue somehow to pay for current price. that is unlikely outcome at best. So yeah I do invest in stocks just not in this much overpriced stock, for "buy low, sell to someone else high" theres bitcoin going from 1 to 20 000 (or just 14k for me) and even in this pure speculation world AMZN is mediocre "investment"
Realistic Man (1 month ago)
+TimeVVaste You don't invest in stocks, do you? You shouldn't invest before you get your understanding straightened out. Then low P/E must be a great bargain, right? Just look at Gilead Science in the past 5 years how it did. It had a P/E of less than 10.
Cornell Daniel (1 month ago)
Go CNBC😎💖 can you open a school?
Mharjhonz Rey Comota (1 month ago)
This was first taught to us in history
Robert Regalado (1 month ago)
Not us
Jose Gomez (1 month ago)
Talk about a T pump lol
Boristien405 (1 month ago)
So basically, government regulation makes people poorer File No. 579915
Jon Greene (1 month ago)
Spoken like a true oatmeal brain.
trapped cat (1 month ago)
It works like this - You invest in company - Company rewards you - You owe rewards to IRS
Business Knowledge (19 days ago)
+No Thoughts Barred And claim your losses too.
No Thoughts Barred (19 days ago)
I'm not American but I'd say reinvest the rewards instead of declaring them.
funny men (1 month ago)
Interesting
Michael Badenhorst (1 month ago)
Paying out dividends is not necessarily a good thing. Yes, it lowers the risk of a stock but it also signals that the company cannot generate more than the current dividend yield by investing it in future growth projects. These companies can easily be left behind and, while they still may be paying their steady dividend years into the future, the opportunity cost of being tied up in them may not necessarily be worth it. Also, the taxes on them suck.
Investing Book Summaries (1 month ago)
Huge fan of dividends. Especially love how Benjamin Graham explains the importance of picking companies with respect to dividends. Good stuff.
Eugene L. Roman (1 month ago)
I'm a Divided Junkie over 50 Stocks with Div
Old Bull Lee (1 month ago)
Workers want a share of profit that they help to create via spending their time but good thing this exists for anyone who invests money. Time > Money .... Employees should have access to a share of profits first.
ThePucko (1 month ago)
Possibly the ability to buy the company stock cheap, but no more than that.
Jan Gjerdum (1 month ago)
Don't take this as financial advise. This video is hugely misinforming and simplified. There is no mention of inflation, opportunity costs, risk, or efficient market theory.
William Smith (1 month ago)
A 7 minute video isn't going to touch on an entire investment theory, I don't understand this complaint.
William Smith (1 month ago)
Yes, it's literally a simple explainer on how dividends work, it wasn't investment advice.
YuriSinclair (1 month ago)
+Marcel Rodriguez read up on Warren buffet heroes n what he called super investors... That's a very good starting point into reading what all those people did. Google non stop on all those he mentions n keep reading. If you don't want to research invest in VOO every month buying Everytime you have enough for a share. VOO is a hold n buy n forget and you will be happy when you finally retire.
skyeric875 (1 month ago)
+Marcel Rodriguez for example. GE cut their dividend signaling they have weaker growth. Doesn't mean they are but that's a signal. Paying dividends are Not an obligation, bond payments are...they can stop or decrease when they want to. I highly advise that you put your money into an index fund like SPY or QQQ and leave it alone until you get more educated. I lost a good sum before I learned
Marcel Rodriguez (1 month ago)
+YuriSinclair so what can i invest in? I only have 1k which isnt much. So i cant even buy a single amazon or google stock. I was putting in whirlpool but as of today they have dropped alot.
Yugioh Pokemon (1 month ago)
Inflation outgrows the return from small dividents your money is better off invested in collectibles or gold
cnordegren (1 month ago)
Of course leftists like Occasional-Cortex will never understand this video
taltalim18 (1 month ago)
cnordegren 🤣🤣 “Occasional-Cortex” good one
PlagueDctr (1 month ago)
Why?
Samuel Pezzetta (1 month ago)
this comment is too good!
videodude2010 (1 month ago)
CNBC has been turning out some quality videos!
Sayan guria (1 month ago)
Warren Buffet's company never gives divided, he says reinvesting it helps more the share holder. He ain't stupid
Tinker Tanner (1 month ago)
Berkshire doesnt pay dividends due to its business structure. Its a holding company that receives dividends from its holdings so that it may acquire other leaders of industry, which in return grow BH stock. If BH were to pay dividends they would be in the red so to speak, and it would negate their very positive balance sheet. BH A shares have ran away long ago, but their B shares are an ok option to ride their growth rate.
STC (1 month ago)
+Patrick Proctor He pledge to donate all his money when he dies, which who cares! He hord as much money as he can when he is alive.
Patrick Proctor (1 month ago)
+STC He's a bigger philanthropist than Adelson, Norquist, and the Koch Brothers combined.
STC (1 month ago)
He is just a stingy old baster that only knows how to make money!
Patrick Proctor (1 month ago)
His comment when he bought his huge share of IBM was "it's all about the dividends". And Berkshire-Hathaway doesn't grow much.
Chloe - TsMsCt Videos (1 month ago)
Explained dividends really well!
Robert Evans (1 month ago)
Complete hog-wash. Inflation = 3% and dividends =3% at best. Buy stocks for their growth and make 30% per year. Buy low (like now) and sell high like I did in the end of the summer of 2018,
Winston Lee (1 month ago)
​+M M I am 30% certain this guy is full of hot air. Realizing your gains every 6-18 months? That's a terrible idea already. Basing your portfolio on public sentiment? He doesn't consider "stock charts" or "pundits prognostications"? I have a hard time believing this guy is actively investing in anything.
Robert Evans (1 month ago)
+M M I don't follow the calendar and only make changes in the one or two stocks I own once in 6 to 18 months depending on whether they are high enough to sell and then wait until the market hits a low a few months later.
M M (1 month ago)
+Robert Evans so every year you have a completely new portfolio, and you make 30% on it? That's impressive.
Robert Evans (1 month ago)
+asianmacker If you look at the underlying stock price for you REIT, you will see its price drop as they milk its value to give you your high dividend. They are essentially giving your own money back and try to entice others to buy into their Ponzi scheme. I did make 72% on a REIT that was sold to Blackrock in 2017 though. I held it for 3 weeks before it sold.
Robert Evans (1 month ago)
+eudofia I don't pour over stock charts and do not focus on the Greek variables or the pundits prognostications. Public sentiment is my standard and I get it from watching the big media companies on YouTube - no advertisements on my browser. I am glad that you are following your own investment style and that you are happy with occasionally getting double digit percentage returns rather than 30% to 50%.
saurabh mahaur (1 month ago)
Most underrated way to earn money in stock market is Dividends
Woodward (1 month ago)
saurabh mahaur Not underrated. To get rich from dividends is incredibly rare and takes long years to accumulate real wealth.
David Zhang (1 month ago)
TheFrosty You must be confused. You are ignoring stock appreciation and DRIP. If you want to take a look at some good dividend stocks, look at JNJ and MSFT. Dividend stocks have beaten the S&P 500 in growth and will probably continue to do so.
Kritav Shah (1 month ago)
+DMND DRK It isn't a bad idea only if you're bad at saving ,25$ returned 15 years later is nothing, if you count the value of money increasing at about 5% every year, the value of the 25$ then is about 52$ now, so to actually be in the green you would have to rely on the value of the stock actually increasing to about 28$ per share to just go above break even...to even make a decent profit, the stock price would have to double
lotto (1 month ago)
+DMND DRK Invest in REITs. Real Estate will never go away.
lotto (1 month ago)
Investing in dividend stocks is better than investing in a 401k
G Watsittoyaa (1 month ago)
This is simple economics , how am i seeing comments that this should be taught in schools , the american system must be horrible
seancb1990 (18 days ago)
G Watsittoyaa it is the same in Canadian schools too
tigerrx (1 month ago)
G Watsittoyaa sounds like a British high school education. Yes?
Raymond Li (1 month ago)
Theres no econ class here in canada
Littleathquakes (1 month ago)
socialized education
Fusion (1 month ago)
Maybe it depends on your state or school district. My highschool had required economics and accounting courses. This is a nice review. BTW, don't invest for dividends, unless you only reinvest the dividend. 15 yrs payback is abysmal. Use the rule of 72 to estimate your horizons
ed James (1 month ago)
I'm so mad that I did not learn this in HS. 5 years off not investing is how school failed me. Glad I pursued this knowledge my self tho.
Kyroh (19 days ago)
We were required to take personal finance at my school senior year. That and economics were the only classes I cared enough to actually pay fully attention to in high school.
Jeremy Davis (29 days ago)
Winston Lee Ap Microecon AP MAcroecon Ap World history Disclaimer I used these examples because the curriculum is the same world wide for ap courses
No Thoughts Barred (29 days ago)
Same story here in the UK. Financial education should be compulsory in secondary school.
Winston Lee (1 month ago)
+Fusion I believe you are being dishonest. Please point out specifically where in the curriculum (which state, which grade, which core courses, etc) this is included. No one I know has encountered this in any kind of education, public or private.
*ĶĪŅĞ_ĐØĽĻĂŘ** Marte (1 month ago)
Marquise Logan that is right 😂😆
Harris W (1 month ago)
We need more of these videos on how to invest. My generation grew up with the Great Recession and are scared of everything having to do with the market. We need videos like these to reach more of Gen Z to keep our financial system running
Angelo Zamora (1 month ago)
Just wait until the market crashes again.
No DAD Not Tonight (1 month ago)
Want more videos like this.
vishal .p (1 month ago)
“Those who own the country should run it.”  Who runs the country: with 97% of elections going to the party with the most money (guess who has the most money?), corporations control elections, and thru them, legislation, policy, and regulation (thru the revolving door. Politicians and businessmen are helping each other by politicians forming easy norms and regulations for businessmen. Businessmen set up new business with politician ..... Govt. is taking double tax from employees,not many benefits for employees,In the end we are suffering.... To sum up: politicians make the laws, but corporations make the politicians.
cmdr corp (1 month ago)
Funny you left out unions, several like the teamsters and teachers unions pay far more than more companies
Darth Bagel (1 month ago)
Easy get money out of politics by 1. Reversing citizen united corporations are not human money can't be free speech for them 2.getting rid of pac money all together 3. Making a constitutional amendment for free and fair elections so money won't decide elections. Those are just 3 things from the top of my head, but if we had a country wide general strike/protest we would get this done in 24 hours; bet?
Franz Hoilett (1 month ago)
CNBC explain videos are really good. Keep them coming.
-4 Subscribers with a hammer addiction (1 month ago)
They should be teaching this in school instead of the mitochondria
Business Knowledge (19 days ago)
We need economics and personal finance classes in schools.
Christopher N (1 month ago)
No need to waste tax payer dollars teaching either subject. You can learn both subjects online, for free.
Keith Santamaria (1 month ago)
I mean doctors easily get paid 300k a year.... The mitochondria is part of pretty important stuff. You can get rich off of it and more importantly you are actually important for society
Cry Whit (1 month ago)
Capitalism isn't a sustainable system...everything has to keep growing and costing _more_ , what do you think the endgame of something like that looks like?
Anak Rajin (1 month ago)
-4 Subscribers with 1 video then none will buy stock from companies developing medicine, food, etc. Why? Because the companies are garbage.
TRAVISTEN COM (1 month ago)
#travisten #traderlife
Jon Greene (1 month ago)
#killalldaytraders I love how poor people have to work for a living and are shamed for wanting a social safety net but rich people just get to rub money together and create more money. Awesome!