Glossary · Stocks and markets
Dividend
A dividend is a share of a company’s profit paid out in cash to the people who own its stock, usually every quarter.
Also called: dividend payment, payout
Dividends of the last 12 months ÷ price, Jun 2026. Average since 1871: 4.2%.
In plain words
When you own a share of a company, you own a tiny slice of its profits. Many companies send part of those profits straight to their owners in cash. That payment is a dividend. If a company pays $2 a year per share and you own 50 shares, you receive $100 a year, usually as four quarterly payments of $25.
The company’s board decides how much to pay. Some firms pay steadily for decades and raise the payout every year; others, especially young fast-growing ones, pay nothing and put every dollar back into the business.
The dividend yield compares the payout with the share price: $2 a year on a $50 share is a 4% yield. For the S&P 500 as a whole it is 1.10% now, against an average of 4.2% since 1871.
Example
Your first dividend
- You buy 100 shares at $40: you pay $4,000.
- The company pays $0.30 per share every quarter: 100 × $0.30 = $30 each time, $120 a year.
- Yield: $120 ÷ $4,000 = 3% a year.
- If the company raises its dividend by 6% a year, after 12 years it pays about $241 a year on the same 100 shares: 6% a year on what you paid.
Taxes and the moves of the share price are left out to keep it simple.
One level deeper
A dividend is not free money on top of the share. On the ex-dividend date the share price usually drops by about the amount paid, because that cash has left the company. What you gain over time is the stream of payments plus the growth of the business.
Reinvesting dividends is where the long-run magic hides. Since 1871, $1 in US stocks grew to about $1,739 from price gains alone, but to about $1.19M with every dividend reinvested: 685 times more.
Companies can also hand cash back by buying their own shares (buybacks). Since the 1980s US companies have leaned more on buybacks, one reason dividend yields are lower than in the past. The share of profit paid out is the payout ratio.
S&P 500 dividend yield since 1871
Before 1990 the yield was usually between about 3% and 7%. Since the 1990s it has been far lower: prices rose faster than payouts, and companies shifted to buybacks. The lowest reading was 1.10% in May 2026.
The numbers behind the chart
| Date | Dividend yield |
|---|---|
| Jan 1871 | 5.9% |
| Dec 1880 | 4.5% |
| Dec 1890 | 4.8% |
| Dec 1900 | 4.4% |
| Dec 1910 | 5.2% |
| Dec 1920 | 7.5% |
| Dec 1930 | 6.3% |
| Dec 1940 | 6.4% |
| Dec 1950 | 7.4% |
| Dec 1960 | 3.4% |
| Dec 1970 | 3.5% |
| Dec 1980 | 4.6% |
| Dec 1990 | 3.7% |
| Dec 2000 | 1.2% |
| Dec 2010 | 1.8% |
| Dec 2020 | 1.6% |
| Dec 2022 | 1.7% |
| Dec 2023 | 1.5% |
| Dec 2024 | 1.2% |
| Dec 2025 | 1.2% |
| Jun 2026 | 1.1% |
Why it matters
Dividends are a big part of what stock investors actually earn: without them, US stocks since 1871 would have returned about 4.9% a year instead of 9.4%.
They are real cash, so they are harder to dress up than accounting profits; a long record of rising dividends is a sign of a steady business.
Many retirees live on dividends instead of selling shares.
A common mistake
Myth: A high dividend yield is always a bargain.
In fact: A yield often looks high because the share price has just collapsed and the market expects the dividend to be cut. A 10% yield that is cut to zero next year pays nothing.
Questions people ask
How often are dividends paid?
Most US companies pay every quarter; many European and Asian firms pay once or twice a year; a few pay monthly. You must own the share before the ex-dividend date to get the next payment.
Do all stocks pay dividends?
No. Many fast-growing companies pay none and reinvest their profits; their owners hope to earn through a rising share price instead.
Are dividends taxed?
Usually yes, in the year you receive them, even if you reinvest them. Rates depend on the country and the type of account; retirement accounts often defer the tax.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite (price, dividends, earnings, CAPE), US consumer prices and the 10-year Treasury rate: Robert J. Shiller, Online Data (shillerdata.com).
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- This page explains a term. It is not investment advice.