Dividends are payments made by a company to its shareholders, typically as a way to distribute a portion of its profits. When you invest in dividend-paying stocks, you can earn income in addition to any potential gains from the stock's price increasing over time.
How Are Dividends Earned?
Dividends are earned by owning shares of a company with dividend-paying stocks. If a company declares a dividend, everyone who owns that company’s stocks on a specific date (the record date) will be eligible to receive a payout. Companies that regularly pay dividends tend to be well-established and financially stable businesses.
How Are Dividends Paid?
Dividends are typically paid in cash and deposited directly into your investment account. Dividends are usually paid on a set schedule, such as quarterly, semi-annually, or annually. Some companies also issue special one-time dividends in addition to regular payments.
How Are Dividends Taxed?
In the context of stock trading, all dividend earnings are taxable. Be sure to consult a tax professional if you have questions about reporting your earnings when filing your annual taxes.
🎗️ Reminder: Each tax season, Allio will make your tax documents available directly in the app under Profile → Documents → Tax Documents
Dividends can be a great way to generate passive income while investing in the stock market. By understanding how dividends work and how they are taxed, you can make informed decisions about incorporating dividend-paying stocks into your investment strategy.
Still have questions?
Use our in-app messenger to connect with a knowledgable, helpful human.