Dividend
A dividend is a share of a company's profits paid out to shareholders, usually every quarter. It's one of two ways stocks make money — the other is price appreciation — and reinvesting dividends instead of spending them is a major driver of long-run compounding.
Dividend yield is the annual dividend divided by the share price — $2 a year on a $50 share is a 4% yield. One mechanic surprises new investors: on the ex-dividend date the share price typically falls by roughly the dividend paid, so receiving one is not free money in the moment. The gain comes from reinvesting it, which is why total return, not yield, is the number that matters. Qualified dividends are taxed at the lower long-term capital-gains rates provided you held the shares long enough; inside a retirement account they compound tax-deferred or tax-free, which is the simplest way to avoid the question entirely.
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