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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 (208)
CNBC (2 months ago)
Have you made money off of a dividend stock? Tell us your experience.
Jae duk Seo (9 days ago)
Such an educational channel
Corey Jordan (2 months 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 (2 months 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 (2 months ago)
In America they pay their shareholders and executives more money.
Money Games (2 months ago)
If you dont invest you will have you spend your entire life working!
No Thoughts Barred (2 months 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 (3 months ago)
Well done CNBC. Good videos lately
Abhishek Varma Buddharaju (3 months ago)
Love the content CNBC is creating. Looking forward for more
4RealKev (3 months ago)
Didnt at n t go out business for a while sooooooooo explains that part
Air Crash (3 months ago)
Why do they tax dividends ?
hbarudi (3 months ago)
When it comes to investing, statistics is king.
IllestGaming (3 months ago)
To make a long story short, I shoved a whole bag of jelly beans up my a$$
kawola17 (2 months ago)
How did it feel.
Commando Master (3 months ago)
Dividends are great. You get paid for sitting around waiting for the stock price to go up.
Business Knowledge (2 months ago)
Reinvest your dividends so you get more money in dividends.
Нанотехнологии (3 months ago)
US Dollars have reduced in their value significantly since 2003, so your statements are wrong.
S Migliore15 (3 months ago)
This video lays it out so nicely
One in a trillion (3 months 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 (3 months ago)
No, dividend payout has not been 2%.
Jerome 092 (3 months 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 (2 months ago)
Reinvest the dividends. Compound interest!
Jason Robinhood (3 months ago)
We have to talk about stock splits @Coloredspaces
Anish Sharma (3 months 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 (3 months 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. (3 months ago)
Dividend investing is only worth it if you're buying billions of dollars in stock.
No Thoughts Barred (2 months 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 (3 months ago)
Dividends are great but they can be dangerous if a company becomes a dividend trap like L brands
Yutube SuspendedMyAccount (3 months ago)
The Wealth Generator and thats where diversify came in.....
wijaya47 (3 months 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 (3 months 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 (3 months ago)
This video is poorly researched
Frank Sanchez (3 months 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 (3 months ago)
Bull ! Scam!
Cry Whit (3 months ago)
Still confused.
Yash Sansaroje (3 months ago)
Can you make more videos on investment company please
Shahrooz Shadbakht (3 months ago)
Andrew Yang Freedom Dividend
Hemanth Kumar (3 months 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 (3 months ago)
Awesome! Please post more videos on finance and investment 😃
The Hunt - North America (3 months ago)
Can I repost this video on my channel?
Itzik beja (3 months 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 (3 months ago)
I love AT&T I own AT&T
Ashley Sim (3 months 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 (3 months 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 (3 months ago)
Dividends are lame ! I would rather invest in rental properties where I would get monthly cashflow instead of every 3 months
YuriSinclair (3 months ago)
You usually have to be leveraged tho going rental side of things
Chris D (3 months 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 (3 months 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 (3 months ago)
I would like to see more detail in stock buybacks.
jooky87 (3 months 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 (2 months ago)
@YuriSinclair Don't work for your MONEY. Make the MONEY work for you.
YuriSinclair (3 months ago)
Exactly, don't be a slave to money, let money be your slave!
TDC (3 months ago)
Just buy and sell
Chris Invests - Personal Finance Videos (3 months ago)
I just started my own channel on personal finance :)
Ratso Rizzo (3 months ago)
CNBC have been putting out great videos recently some good reporting well done!! 👏👏👏👍
Joshua Degreiff (3 months 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 (3 months ago)
I’m not sure any scientists are studying “nbc” stock picks.
Benjamin Buckley (3 months 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 (3 months ago)
Dividends are the jewel of investing. Every one of my ETF’s pay dividends.
Jalen D (3 months ago)
Which etfs do you have?
J. l00Ti (3 months ago)
RDIV is a good one
Alejandro Preciado (3 months 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 (3 months ago)
Buy 100 shares of a penny stock, every time he says dividends
Real Robs (3 months ago)
The best investor is one who puts money in penny stocks Jk
sujit meka (3 months ago)
do options
Realistic Man (3 months ago)
If you invested in Amazon or Apple in their early days, you wouldn't have given a damn about dividends...
Realistic Man (3 months 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 (3 months ago)
@Realistic Man you mean investing or speculating on price?
Realistic Man (3 months 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 (3 months 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 (3 months 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 (3 months ago)
Go CNBC😎💖 can you open a school?
Mharjhonz Rey Comota (3 months ago)
This was first taught to us in history
Robert Regalado (3 months ago)
Not us
Jose Gomez (3 months ago)
Talk about a T pump lol
Boristien405 (3 months ago)
So basically, government regulation makes people poorer File No. 579915
Jon Greene (3 months ago)
Spoken like a true oatmeal brain.
trapped cat (3 months ago)
It works like this - You invest in company - Company rewards you - You owe rewards to IRS
476 Anno Domini (27 days ago)
trapped cat wow is that wrong
Business Knowledge (2 months ago)
@No Thoughts Barred And claim your losses too.
No Thoughts Barred (2 months ago)
I'm not American but I'd say reinvest the rewards instead of declaring them.
funny men (3 months ago)
Interesting
Michael Badenhorst (3 months 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 (3 months 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 (2 months ago)
I'm a Divided Junkie over 50 Stocks with Div
Old Bull Lee (3 months 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 (3 months ago)
Possibly the ability to buy the company stock cheap, but no more than that.
Jan Gjerdum (3 months 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 (3 months ago)
A 7 minute video isn't going to touch on an entire investment theory, I don't understand this complaint.
William Smith (3 months ago)
Yes, it's literally a simple explainer on how dividends work, it wasn't investment advice.
YuriSinclair (3 months 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 (3 months 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 (3 months 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 (3 months ago)
Inflation outgrows the return from small dividents your money is better off invested in collectibles or gold
cnordegren (3 months ago)
Of course leftists like Occasional-Cortex will never understand this video
taltalim18 (3 months ago)
cnordegren 🤣🤣 “Occasional-Cortex” good one
PlagueDctr (3 months ago)
Why?
Samuel Pezzetta (3 months ago)
this comment is too good!
videodude2010 (3 months ago)
CNBC has been turning out some quality videos!
Sayan guria (3 months ago)
Warren Buffet's company never gives divided, he says reinvesting it helps more the share holder. He ain't stupid
Tinker Tanner (3 months 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 (3 months 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 (3 months ago)
@STC He's a bigger philanthropist than Adelson, Norquist, and the Koch Brothers combined.
STC (3 months ago)
He is just a stingy old baster that only knows how to make money!
Patrick Proctor (3 months 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 (3 months ago)
Explained dividends really well!
Robert Evans (3 months 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 (2 months 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 (3 months 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 (3 months ago)
@Robert Evans so every year you have a completely new portfolio, and you make 30% on it? That's impressive.
Robert Evans (3 months 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 (3 months 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 (3 months ago)
Most underrated way to earn money in stock market is Dividends
Woodward (3 months ago)
saurabh mahaur Not underrated. To get rich from dividends is incredibly rare and takes long years to accumulate real wealth.
David Zhang (3 months 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 (3 months 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 (3 months ago)
@DMND DRK Invest in REITs. Real Estate will never go away.
lotto (3 months ago)
Investing in dividend stocks is better than investing in a 401k
G Watsittoyaa (3 months ago)
This is simple economics , how am i seeing comments that this should be taught in schools , the american system must be horrible
seancb1990 (2 months ago)
G Watsittoyaa it is the same in Canadian schools too
tigerrx (3 months ago)
G Watsittoyaa sounds like a British high school education. Yes?
Raymond Li (3 months ago)
Theres no econ class here in canada
Littleathquakes (3 months ago)
socialized education
Fusion (3 months 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 (3 months 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.
476 Anno Domini (27 days ago)
Winston Lee many states require personal finance courses. Usually with economics
476 Anno Domini (27 days ago)
ed James would have payed attention if it was taught in schools? The answer is no
Kyroh (2 months 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 (2 months 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 (2 months ago)
Same story here in the UK. Financial education should be compulsory in secondary school.
Harris W (3 months 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 (3 months ago)
Just wait until the market crashes again.
No DAD Not Tonight (3 months ago)
Want more videos like this.
vishal .p (3 months 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 (3 months ago)
Funny you left out unions, several like the teamsters and teachers unions pay far more than more companies
Darth Bagel (3 months 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 (3 months ago)
CNBC explain videos are really good. Keep them coming.
-4 Subscribers with a hammer addiction (3 months ago)
They should be teaching this in school instead of the mitochondria
Business Knowledge (2 months ago)
We need economics and personal finance classes in schools.
Christopher N (3 months ago)
No need to waste tax payer dollars teaching either subject. You can learn both subjects online, for free.
Keith Santamaria (3 months 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 (3 months 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 (3 months 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 (3 months ago)
#travisten #traderlife
Jon Greene (3 months 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!