SoFi

When deciding which applicants to accept, colleges and universities typically look for the best of the best. But, that doesn’t always mean the “best” is the person with the highest grades in high school.

Yes, a student’s grade point average, or GPA, is a good metric for measuring just what and how successfully they completed their high school course, but how much does a student’s GPA really matter for college admission? It depends.

Keep reading to find out when it matters, when it doesn’t, and all the other factors college admissions take into account beyond a student’s GPA.

Weighted vs Unweighted GPA

Traditionally, high schools measure a student’s academic performance on an unweighted GPA scale, meaning the number only goes up to a 4.0 for an A in a class. This measurement method does not take into account the difficulty level of classes, so an honors English class will be measured in the same way as a non-honors class.

On the other hand, weighted GPAs do take into account the difficulty level of a student’s coursework. Most weighted GPA scales measure from a 0 to a 5.0. This means, an AP-level or honors level class could earn a student a 5.0, while a lower-level class will only reward A work with a 4.0.

A weighted scale can offer students a little more flexibility when it comes to their overall GPA. Say a student is taking four classes, one is an honors level course and the three others are typical classes. The student receives an A in the honors class, which accounts for a 5.0; an A in two other courses, denoting a 4.0 and a 4.0, and a B in the last, at a 3.0. Despite receiving a B in a course, that would still end up with a weighted 4.0 GPA.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Do Colleges Look at Weighted vs. Unweighted?

For the sake of looking at all applicants equally, colleges generally look at unweighted GPAs. They will typically separately consider how rigorous the coursework was. So, for example, if you took all AP classes and have an unweighted 4.0 GPA, you would be seen as a stronger applicant than someone who took less challenging courses and also got an unweighted 4.0, even though your GPAs are the same.

Colleges also look at unweighted GPAs (as well as standardized test scores and other factors) for merit-based scholarships. The more successful students are more likely to receive tuition funding.

College admissions staff may also look into other things when it comes to a student’s GPA, including grade trends. If a student didn’t start out high school on the best note, but performed well during their junior and senior year with a strong GPA, admissions may see that as excellent growth and perseverance in a student’s academic career.

Recommended: How Do Grades Affect Your Student Loans?

A “Good” GPA

Again, it’s important to remember that your GPA isn’t everything and that college admissions staff will likely look at much more than just your grades. However, it’s also always nice to know where you stand amongst the pack.

The average high school GPA is around 3.0 (or a B), including students who do and don’t apply to college. However, the average GPA for students applying to college is closer to 3.5 to 4.0, and the average for students applying to Ivy League schools can be even higher – 4.00 or close to it.

The average weighted GPA is 4.15 at Harvard and MIT.

While GPA isn’t everything, it’s a good idea to keep it in mind when deciding which schools, or how many, to apply to.

Recommended: How to Get Into College With a GED

What Else Do Colleges Look At?

Yes, colleges will take into account a student’s GPA. However, colleges and universities also take into account a complete picture of who a student is. That means they look into trends in a student’s grades throughout their education and likely look at a student’s test scores on the SAT or ACT.

College admissions officers also look at a student’s involvement in extracurriculars, sports teams, their involvement in their community through organizations and volunteer work, and any relevant work experience.

Admissions staff will also likely weigh a student’s application using their recommendation letters, which speak to a student’s merit far beyond their grades. Admissions will also read a student’s complete application and read any required essays.

Again, a lot goes into the admissions process, and grades aren’t the end all be all. This all means when you are preparing for college, even in your early high school years, you may want to prepare by diversifying your interests and pursuits to ensure they can tell a larger story in their application.

Colleges That Don’t Take GPA Into Account

There are schools out there with low or no minimum GPA requirements for applicants. These include many for-profit schools, as well as community colleges. In fact, if your GPA is on the lower end, you might consider attending a community college for a year or two and then transferring to a four-year university or college.

For example, California Community Colleges do not have a minimum GPA or testing requirements for incoming students. Attending a community college could be a great way for students to learn and grow personally and academically, and to increase their academic performance before transferring.

No Matter a Student’s GPA, It’s Good to Have a Plan

Being financially prepared for college can help take some of the stress away from worrying about how your GPA will affect your chances of admission.

While filling out applications, you may want to also look into all your financial options as well. This begins with filling out the Free Application for Federal Student Aid (FAFSA) to see if you are eligible for federal student aid, which include grants, scholarships, work-study, and federal loans.

If you still have gaps to fill, you may also want to consider a private student loan via a bank, credit union, or private lender. Unlike federal student loans, this involves a credit check. Students who have strong finances (or have a cosigner who does) stand to get lower interest rates and more favorable loan terms. Keep in mind that private student loans don’t come with government protections such as forbearance and forgiveness programs.


💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

The Takeaway

GPA is one factor in the college admissions process. How heavily GPA is weighted as a factor in admissions decisions will vary from school to school. Many schools will list the average GPA of admitted students, which can help give you an idea of how your GPA stacks up to students at that school. Other factors for admission might include a student’s transcript, letters of recommendation, and personal essay.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIS0723006

Read more

Some college students grapple with a challenge that has little to do with grades or the overall college experience: helicopter parents.

These well-meaning moms and dads insert themselves into the lives of their emerging adult children to a degree that may hinder the development of coping skills.

College orientation programs for nervous parents have become more common. Even so, some parents have trouble letting go. With the price of college having doubled in 20 years, some parents want to make sure they’re getting their money’s worth.

Hobbled by Helicopter Parenting

The risks of helicopter parenting are real, researchers say.

In a review article published in June 2022 in the Journal of Emerging Adulthood, researchers analyzed more than 70 studies done over the last 20 years on helicopter parenting. Across the board, they found strong negative associations between overparenting and a college student’s development in the psychological, behavioral, social, academic, and career areas.

Researchers define helicopter parents as moms or dads who “excessively monitor their children and often remove obstacles from their paths, instead of helping them develop the skills to handle the inevitable difficulties of life.” Helicopter college parents may reach out directly to college professors and administrators about grades or nag their children about academic deadlines and test results.

Why is this so harmful? When kids go off to college, they are entering a period of life psychologists call “emerging adulthood.” The goal during this phase is to become independent and self-sufficient. If a student’s parents are always doing things for them, it can keep them from learning essential skills they need to become a successful adult.

Overparenting can also make students feel inadequate and helpless, taking a major toll on their self-esteem. Studies have even found a link between helicopter parenting and higher alcohol and other substance use, depression and anxiety, as well as lower educational achievement.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

How to Deal With Helicopter Parents

For students stranded between demanding academic obligations and surveillance-minded parents, the path forward may involve a strong dose of self-discipline, a willingness to learn and make mistakes, and an open call for independence. Here are some ideas.

Adjust How You Engage

If parental hovering seems unavoidable, students may want to diplomatically tighten up engagements with Mom and/or Dad.

Unless the student is in a serious health or financial crisis, there’s no need for a daily phone call, Zoom meeting, or even text with parents.

Students should talk to parents before leaving for campus and ideally agree on a scheduled conversation, perhaps weekly or biweekly.

Students who do not feel pressured may decide that frequent calls, emails, or texts are OK — as long as they initiate the engagement.

Ask for a Coach, Not a Problem Solver

When a young person leaves for college, the temptation for many parents is to step in and solve every problem for them, thus taking a learning experience out of the equation.

Yes, living away from home for the first time can be intimidating and yes, a parent’s inclination is to take over the situation and straighten things out. That, however, may deprive the child of a much-needed learning experience.

Mistakes are inevitable. “It doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and neither should you. All you have to do is learn from them and those around you …,” entrepreneur Mark Cuban has written.

Students should strive to make their own academic and lifestyle decisions (but not big health care or financial decisions, at least not yet), with parents supporting and coaching in the background.

Take the Long View

Helicopter parents invariably view their child’s problems and challenges on campus with a short-term outlook. Instead, students should emphasize the learning experiences they’re having and that the experiences are positive in the long haul.

While parents may fret over their child not getting into a class, missing out on a grant, loan, or scholarship, or just getting a problem roommate — situations that can call for a remedy — they’re experiences best handled by the student, who can make that exact case to parents.

It might be helpful to say: “Mom/Dad, I’m learning from my own problematic scenarios, I’m growing a thicker skin, and I’m learning how to solve problems and make decisions like an adult. When I do need your involvement, I hope you’ll trust me to let you know as soon as possible.”

The takeaway for both parties: A big part of attending college is becoming your own self-advocate in life, and some patience and pullback on the part of parents (and encouraged by the student) can help that happen.

Ask for Your Own Bank Account

To further declare independence from helicopter parents, college students may want to ask them to take their name off a shared bank account. Doing so will allow students to learn how to manage money on their own, with Mom and Dad in the background if needed.

Let parents know that any excessive spending or critical financial needs can, when necessary, involve them. But being responsible for finances is a critical lesson best learned by the student.

For college students, that means making the case that financial literacy is a gift and that college is a great place to earn it.


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

Create Boundaries on Student Portals

Digital student portals are valuable tools for both students and parents, but college students may want to establish boundaries on parental portal engagements.

Yes, parents will want to log on to the parental portion of their student’s online college portal (mainly to check finances, review financial aid, and pay tuition bills).

Past that, there’s no need for parents to regularly plug in to their student’s primary online portal and sound off about everyday collegiate experiences.

Particularly, college students may not want their parents looking at their calendars, classroom grades, student-teacher interactions, and portal emails designed for the student’s eyes only.

College students can remedy that situation by having their parents agree on portal access conditions, like checking grades once a month or even once a semester.

Making the case that portal engagements, with boundaries, are the domain of the student can provide a sense of trust and privacy, especially in the first year at school.

Take a Bigger Role in College Finances

College students may be able to help their own cause by partnering with parents on college financing issues and learning to be good stewards of their college money.

That means visiting the financial portion of the college portal and seeing what has been paid, what is owed, and what is available in financial aid.

Helping out with the Free Application for Federal Student Aid (FAFSA) each year will also give the student a realistic look at the cost of college, which may provide an incentive to make that cost worthwhile.

When you know exactly where you stand financially on campus, you can begin making decisions on key issues like course loads, living on or off campus, accepting a work-study program, and taking on a part-time job.

Additionally, taking a shared-responsibility role can help with long-term college decisions, like taking an internship overseas or moving on to graduate school.

The Takeaway

College students can take steps to deal with helicopter parents, who may hinder the development of skills to handle the inevitable difficulties of life.

The suggestions are rooted in convincing parents to take a supportive but not supervisory role in the student’s everyday college experience.

Financial literacy means knowing the options for paying the myriad costs of college, from tuition to housing and food: federal grants, work-study, student loans, merit scholarships, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIS0623001

Read more

When applying for college, there are a lot of details to consider. Once the SAT scores are in, the essay is written, and the application is complete, there’s one more step: paying the college application fee.

If you are applying to more than one school, those fees can really add up.

Luckily there is a way to get out of paying to apply to a school: a college application fee waiver.

Here’s more intel for students and their parents about application fees and waivers.

The 411 on Application Fees

Many colleges and grad schools require applicants to pay a fee.

U.S. News & World Report looked at 889 ranked colleges and found that the average application fee was $45. It noted that 64 schools charged prices exceeding $75. Arkansas Baptist College had the highest application fee, at $100.

If a student is applying to more than one school, these costs can not only add up but also be prohibitive for some.

While there is no set standard for how many schools a student should apply to, some experts say it’s a good idea to apply to between six and eight colleges — two to three to act as safety schools, two as target schools, and two “reach” schools.

At $45 per college, on average, that could add up to $270 to $360. There are, however, ways to get around the fees.


💡 Quick Tip: SoFi offers low fixed- or variable-interest rates. So you can get a private student loan that fits your budget.

Ask the College for a Waiver

Many colleges and universities allow students to directly ask for an application fee waiver.

Typically, the application will have a field that students or parents can fill out asking for the application fee to be waived.

If there is no space on the application, students or parents could simply call the school’s registrar office and ask what options may be available to them.

Recommended: Important College Application Deadlines

Getting Help From Nonprofits

National Association for College Admission Counseling

The National Association for College Admission Counseling offers a request for an application fee waiver that can be filled out online and submitted with each application.

To fill out the form, the student simply writes the name of the college on the top line, and then fills out the “Student” section and checks the appropriate boxes in the “Economic Need” section. If none apply, an applicant can click “Other Request” and explain the financial need for the fee waiver.

Then, a school counselor, postsecondary support person, or principal at the student’s school, or a person from a community-based organization needs to complete the Authorized Official section to verify economic eligibility.

Students send the completed form directly to the university’s admissions office. College applicants may want to check with the office if they do not hear back about an approval status within a month.

Recommended: Grants For College — Find Free Money for Students

Common Application

The Common Application is a generic application used by 1,000 schools.

Using the application makes it easy for students to apply for more schools at once. And, within the application, students can request a fee waiver in the profile section. According to the Common Application, students can qualify for a fee waiver for a variety of reasons.

Those include if they are enrolled in or eligible to participate in the federal free or reduced-price lunch program, annual family income falls within the Income eligibility guidelines set by the USDA Food and Nutrition Service, and if they are enrolled in a federal, state, or local program that aids students from low-income families.

Students can also qualify if their family receives public assistance or if they live in federally subsidized public housing or a foster home, or are homeless. Students who are wards of the state or can provide a supporting statement on economic need from a school official can also apply for a waiver.

The Common Application fee waiver may also be available for international applicants. It’s important to note that it is still up to each school if it accepts a fee waiver request.

Recommended: Paying for College Without Parents Help

College Board

Students aiming for college will likely have to take a standardized test, presumably either the ACT or the SAT, as part of their application. The SAT costs $60 for each standard SAT a student takes, and each ACT is $68 (There is an additional cost if a student wants to take the essay portion of the tests.)

Eligible students can get fee waivers for up to two of each standardized test. Typically, they qualify if they live in a foster home or public housing or receive free or reduced-price lunches. Family income can also be a qualifier. Students will have to speak to a school administrator to receive the waiver, as each testing company allocates a specific number of waivers to each school.

So, how can this help with the college application fee? By qualifying for the SAT or ACT waiver, a student also gets to waive the application costs for four colleges. Those who are eligible for an SAT waiver will receive application waivers via the College Board, making it easy to streamline the process.

Attend a College Fair or Visit the School

Some colleges and universities may be willing to hand out application fee waivers to students who visit the school.

For example, the University of Pittsburgh offers an application fee waiver to those who travel to and tour the school during a specific time period.There is no need to show financial need for the waiver.

Most schools do not actively advertise these specials, so students are encouraged to dig deeply into their choice school’s website or call the school’s office of admissions to find out if this may be an option.

How to Find Colleges With No Application Fees

There are a number of colleges out there that don’t require an application fee at all.

Tulane University in New Orleans, Loyola University Chicago, and Baylor University in Waco, Texas are just a few of the many schools that don’t require an application fee.

In some cases, a school will waive their application fees during certain time frames, such as the middle of October. You can do an online search for “colleges with no application fees” to find lists, but will want to follow up with any schools you’re interested in to make sure the information is up to date.


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

Paying for College

Getting past the application is just the beginning. From there, students will have to navigate the cost of housing, tuition, books, and more. For many, that means taking out loans.

Students can fill out the Free Application for Federal Student Aid, or FAFSA to see if they are eligible for student aid from the federal government. Colleges may then use the information provided to determine specific aid needs.

You can discuss federal aid and loan options directly with the schools of choice. If you still have gaps in funding, you may be able to cover them with a private student loan. These are available through banks, credit unions, and online lenders. Keep in mind, though, that private loans don’t offer the same protections, such as government forgiveness or forbearance programs that come with federal student loans.

To qualify for a private student loan, you need to fill out a loan application alone or with a cosigner. The amount of money you can borrow and the interest rate usually depend on credit scores and income.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIS0623004

Read more

Some companies may have the financial means to make regular dividend payments before being listed on a public exchange, i.e. prior to their initial public offering, or IPO. A company may choose to offer this type of pre-IPO dividend in order to garner interest in the IPO if it anticipates a high valuation.

Dividends represent a percentage of a company’s profits that it pays out to shareholders. Dividends most commonly come from established companies, but it’s possible to collect an IPO dividend from up-and-coming companies as well.

Do IPOs Offer Dividends?

Most companies that are going public are doing so to raise capital and don’t necessarily have money to spare that they can pay out as special dividends or stock dividends.

However, some companies involved in the IPO process can pay dividends on a regular basis before and/or after going public, or they may pay a special one-time dividend. In either case, the dividends could serve as a useful incentive to attract and retain investors.

In general dividend-paying stocks and IPOs pay different roles in an investors’ portfolio. The former represents a steady source of income, while the latter holds the potential for capital appreciation through strategies such as the Dogs of the Dow, a strategy in which investors purchase the Dow Jones Industrial Average stocks with the highest dividend yield.

A simple way to know whether a pre-IPO company plans to offer a dividend is to review their registration documents. Companies must amend their S-1 registration form with the SEC if they plan to offer any type of dividend payment to investors. You can find S-1 forms through the SEC’s EDGAR database online.


💡 Quick Tip: Keen to invest in an initial public offering, or IPO? Be sure to check with your brokerage about what’s required. Typically IPO stock is available only to eligible investors.

[ipo_launch]

REIT IPOs and Dividends

Typically, companies do not offer dividends as part of the IPO process. If you do find an IPO company that’s offering a dividend payment, it’s more likely to be a real estate investment trust (REIT) versus a more traditional company structure.

REITs are companies that own income-producing real estate investments and must pay out 90% of their taxable income to shareholders as dividends. Just like other companies, REITs can choose to go public in order to raise capital from investors.

REIT IPOs work a little differently than other IPOs in that there are additional filing requirements they have to meet under SEC rules, but otherwise the overall process is largely the same.

IPOs Explained

IPO stands for Initial Public Offering, and the event represents the first time a company makes its shares available for trade on a public exchange. This is often referred to as “going public”.

Companies launch IPOs, a process regulated to raise capital from investors. The Securities and Exchange Commission regulates the IPO process to ensure that the company has performed its due diligence, completed all of the appropriate paperwork, and established an accurate valuation of the IPO.

Investing in IPOs can offer an opportunity to diversify a portfolio while potentially getting in on the ground floor of a company poised for significant growth. It can, however, be risky as there are no guarantees whether an IPO stock will be a success — and even a successful IPO doesn’t necessarily predict how well a company will do over time.

For this reason, it can be difficult for individual investors to buy IPO stock when it’s first issued. In most cases, individuals can trade IPO shares on the secondary market through their brokerage.

IPO stocks are considered high-risk investments, and while some companies may present an opportunity for growth, there are no guarantees. Like investing in any other type of stock, it’s essential for investors to do their due diligence.


💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Dividends Explained

A dividend is a share of a company’s profits that’s paid out to shareholders, usually in cash. The company determines how frequently to make these payments to investors. For example companies may pay dividends on a monthly, quarterly, biannual or annual basis, or it can pay them on a one-time basis.

The amount an investor receives in dividends correlates to the amount of stock they own. Preferred stock shareholders receive first priority for dividend payouts, ahead of common stock shareholders. However, preferred stock shareholders do not have voting rights while common stock shareholders do.

Companies that offer dividends can decide whether to increase or decrease dividend payouts over time, depending on profitability. Companies that consistently increase dividend payouts over a period of 25 consecutive years or more are called Dividend Aristocrats. Companies that do so over a period of 50 consecutive years or more are called Dividend Kings.

Types of Dividends

Dividends can take different forms, depending on when and why a company pays them out to investors. When discussing IPOs and dividends, you’re typically talking about special dividends and stock dividends. Companies may use both to encourage investors to buy that their IPO is an investment opportunity, though they aren’t exactly the same in terms of what the investor is getting.

Special Dividends

Special dividends, also referred to as one-time dividends or extra dividends, are dividend payments made to investors outside the scope of regular dividend payments. A company that plans to go public may make a pre-IPO special dividend payment to its existing shareholders. The total value of the dividends paid may be equal to or less than the amount the company expects to be raised through the Initial Public Offering.

Dividends

Dividends are regular payments made in stock or via cash to shareholders out of a company’s profits. Cash dividends can increase the value of an investor’s holdings over time if the investor reinvests them in the stock. Again, the amount an investor receives in dividends depends on the company.

Dividends may go up when profits are up and drop when profits fall. But a high dividend payout alone is not a reason to consider investing in a company. It’s important to look at the company’s financials to determine whether that higher payout is sustainable over time.

Why Do Companies Give Dividends?

Companies offer dividends as a reward or incentive to attract new investors and retain existing ones. A company that offers a dividend regularly can attract income-focused investors. As long as the dividend payout sticks around, then the investors are likely to stick around as well. Of course, this assumes that a company is profitable and has the means to pay out dividends in the first place.

Dividends are less common among newer companies because they’re typically reinvesting any profits they realize into further growth. That doesn’t mean they won’t offer a dividend to investors later but for the near term, they may need every bit of profit to continue expanding.

The Takeaway

The purpose of most IPOs is to raise capital and generate buzz; paying shareholder dividends is more common with an initial public offering for a REIT than a traditional company IPO. In either case, the dividends could serve as an incentive to attract new investors.

The easiest way to know whether a pre-IPO company plans to offer a dividend is to review their registration documents by reading the S-1 registration form that’s been submitted to the SEC.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What is an IPO dividend?

An IPO dividend is a dividend payout associated with a company’s Initial Public Offering. IPO companies can make special dividend payouts on a one-time basis or offer regular stock dividend payments to investors.

How do shareholders make money in an IPO?

Shareholders can make money in an IPO if they’re able to sell shares at a higher price than their initial offering price. Shareholders can also collect IPO dividend payments to supplement their profits.

Are dividends taxed?

Yes. The IRS considers dividends a form of taxable income. The tax rate that applies can depend on whether you have qualified or nonqualified dividends. The IRS taxes nonqualified dividends at ordinary income tax rates while qualified dividends follow the long-term capital gains tax rate structure.

---

Photo credit: iStock/LaylaBird

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN0623076

Read more