Stock Dividends

   Numerous companies select to distribute part of their earnings as a dividend. By paying out dividends, companies can attract interest in their stock, resulting in a nice increase in the price. Large, established companies who can no longer grow at large rates usually offer dividends.

   The board of directors of a company decide if a dividend will be offered, how often it will be offered, and the dates associated with the dividend. If one is announced, of a set amount, it will be paid to investors of record as of the record date. In order to be a shareholder of record, you must own the stock on the record date. Because all trades take three days to settle, you must, at least, buy the stock three days before the record date. If you choose to sell the stock the day after the record date you will still receive the dividend.

   Companies usually keep the size of the dividend unchanged, barring any drastic changes in strategy or financial condition. If you own the shares yourself then you will receive a check in the mail. If you participate in a DRIP and choose to reinvest the dividend credited to your DRIP account and purchase shares.

   The risk for investors investing in companies which offer dividends is pretty moderate. Companies that pay dividends aren't "get rich quick" plays so they're better for long-term investing. If you are looking for a modest return, utility and seasonal companies are good candidates to research.