InsiderFlow › Glossary › What is a dividend?
A dividend is the portion of profits a company distributes to its shareholders, usually in cash and on a regular schedule.
When a company ends the year with a profit it can reinvest it or distribute part of it to shareholders: that distribution is the dividend. Mature companies like Coca-Cola pay regular dividends; many growth companies, as Amazon long did, prefer to reinvest everything.
A dividend isn't "free money": on the ex-dividend date the stock price drops by roughly the amount paid out. What matters is the company's ability to generate profits over time, not a single payout.
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You must own the stock before the ex-date; payment arrives on the payment date, usually a few weeks later.
Not always: an unusually high yield can signal a collapsed price or an unsustainable dividend.