Dividends are a portion of earnings that a company pays to certain shareholders who own dividend-paying stock. Dividends are generally paid quarterly, although the timing of dividend payments can vary depending on the company: some dividends might be monthly, or twice a year.
Most companies pay dividends in cash, or as additional shares of stock. Investors can take dividend payouts to supplement income or savings (or other goals). They can also reinvest their dividends as part of a dividend reinvestment plan, or DRIP.
Not all companies pay dividends, however. And just because a company pays dividends now doesn’t mean it will continue to do so. A company can stop paying dividends at any time.
Investors may be qualified to receive dividends depending on when they purchase shares of stock. It’s important to understand the key dates regarding dividend payouts.
Key Points
• Dividends are a portion of a company’s earnings paid to qualified shareholders typically each quarter.
• Some stocks may pay dividends monthly, semi-annually, annually, or on an irregular schedule.
• Dividends can be paid in cash, company stock (often through dividend reinvestment plans), or, rarely, as property.
• Key dates involved in dividend payments include the declaration date, date of record, ex-dividend date, and payment date.
• Dividend income is taxable, with the tax rate depending on whether it’s a qualified or nonqualified dividend and the investor’s tax situation.
What Are Dividends?
Companies will sometimes share a portion of their profits with shareholders, and this is called a dividend. Dividends are typically distributed as cash, although it’s also possible to receive a dividend in the form of stock (or some other asset).
Typically, dividends work on a per-share basis. Investors who buy stocks online or through a traditional brokerage can look for dividend-paying stocks. For example, if Company A pays a quarterly cash dividend of 50 cents per share, and an investor owns 50 shares, they would receive $25 in cash every quarter.
If a company pays a stock dividend, it’s usually a percentage increase in the number of shares an investor owns. So if Company A awards a 5% stock dividend and an investor owns 100 shares of Company A, they would have 105 shares after the dividend payout.
Remember that dividend income is taxable (see below), and dividends are not guaranteed. A company may start or stop paying dividends at any time.
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How Often Are Dividends Paid Out?
In most cases in the U.S., dividends are paid quarterly, on the same schedule as the company must report earnings.
If you’re wondering why companies generally pay quarterly vs. monthly dividends, it makes sense that dividends would come only after a company has finalized its income statement and its board of directors has reviewed (and approved) the numbers.
Some investments pay dividends on other schedules, such as twice a year, once a year, or monthly, for monthly dividend stocks, or on no schedule at all (called “irregular” dividends, though this isn’t typical in the United States). Ultimately, the dividend payout schedule is up to a company’s board of directors.
It’s also possible for a company to pay a special one-time dividend. Usually a special dividend is paid out when a company has had a stronger-than-usual earnings period or has excess cash on hand — from the sale of a business, perhaps, or the liquidation of an investment, or a major litigation win. These special one-time dividends may be paid as cash, stock, or property dividends.
When it comes to mutual funds that invest in dividend-paying companies, they may pay dividends on a more frequent basis, such as monthly or even weekly. It may be possible to invest in dividend funds, or even dividend stocks, when you open an IRA.
Important Dividend Dates
There are four essential dates involved in the payment of dividends. It’s important for investors to pay attention to these dates, to ensure they’re getting the dividend payout they hope for.
1. Declaration date. Also called the announcement date, this is the day that a company’s board of directors states their intention to pay a dividend. It’s typically announced every quarter.
2. Date of record and ex-dividend date. The record date and the ex-dividend date used to be separate dates. Now owing to the T+1 settlement rule, whereby trades must settle within one business day, they are typically the same in the U.S.
Nonetheless, they signify two different actions by the company which can impact investors. The first is the date of record: shareholders must be on the company books before this date in order to get the dividend. Shareholders who buy stock on or after this date, which is also the ex-dividend date (i.e., the date that quarter’s dividend expires), will not qualify for the dividend and it will go to the seller for that quarter.
Note that if the date of record falls on a weekend or holiday, the ex-dividend date in that case is the business day before.
3. Payment date: This is when dividends are paid to company shareholders.
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IMPORTANT DIVIDEND DATES for 5 Companies in the S&P 500 Dividend Aristocrats Index, paying qualified dividends, as of 9/03/25 |
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|---|---|---|---|---|---|
| Company | Dividend Payout | Declaration Date | Record Date / Ex-Dividend Date | Payment Date | |
| Kimberly-Clark Corp (KMB) | $1.26 | Aug. 1, 2025 | Sept. 5, 2025 | Oct. 2, 2025 | |
| Leggett and Platt (LEG) | $0.05 | Aug. 7, 2025 | Sept. 15, 2025 | Oct. 15, 2025 | |
| Farmers & Merchants Bancorp (FMCB)* | $5.00 | Aug. 2, 2025 | Sept. 11, 2025 | Oct. 1, 2025 | |
| 3M Company (MMM) | $0.73 | Nov. 5, 2025 | Nov. 14, 2025 | Dec. 12, 2025 | |
| Gorman-Rupp Company (GRC) | $0.19 | Oct. 24, 2025 | Nov. 14, 2025 | Dec. 10, 2025 | |
Source: dividend.com, as of 9/03/25.
*Semi-annual dividend
Typically, investors can get information about a company’s dividend dates by visiting its investor relations page. To find this, search for the company’s name and “investor relations” online. Or check a company’s dividend history online. Many investment websites, including Nasdaq.com, track this information.
When Are Dividends Paid?
Once a company’s board of directors approves a plan to pay out dividends, the company announces the dividend payment information, including: the dividend amount to be paid, the date it will be paid, and the date of record and the ex-dividend date (which typically occur together, unless the record date falls on a weekend or holiday).
On the payment date, the dividend is paid to investors who owned the stock before the ex-dividend date. Consider the following hypothetical example:
• Company A announces its dividend payout on September 1, 2025. This is the declaration date for a dividend payout on Sept. 17.
• Sunday, Sept. 14 is the record date. Shareholders must be on record as owning the company stock before September 14, in order to get the dividend.
• The ex-dividend date cannot fall on a weekend or holiday, so it’s set to the business day before the record date: Friday, September 12, 2025. In order to get the dividend, an investor must buy shares before the ex-dividend date.
• The dividend itself will be paid on Wednesday, Sept. 17, 2025.
Different Dividend Payout Methods
These are some of the ways dividends may be paid to investors.
Cash Dividends
Dividends are often paid in cash. Companies typically send cash dividends directly to an investor’s brokerage, where the money is deposited into their account. The company might also mail a check to stockholders.
Company Stock Dividends
In other cases, investors will be paid in company stocks. Some companies and mutual funds offer the option of a dividend reinvestment plan (DRIP) that will automatically buy additional shares for an investor with their dividends. This provides the advantages of both simplifying the process (since investors won’t have to receive the cash and buy more shares themselves) and potentially being more cost effective, since many DRIP programs don’t charge commissions.
Additionally, some DRIP programs discount the purchase of additional shares. For this and other reasons, some investors may specifically look to find dividend reinvestment stocks.
Property Dividends
More rarely, a company might award a property dividend instead of cash or stock payouts. This could include company products, shares of a subsidiary company, or physical assets the company owns.
Are Dividends Taxable?
Dividend income is always taxable, but tax treatment depends on the type of dividend the shareholder gets (qualified or nonqualified dividends), as well as the type of account in which the dividend stock is held.
The Type of Account Impacts How Dividends Are Taxed
For instance, if an investor is holding the investment in a retirement account such as a 401(k) or IRA, the dividend isn’t taxable the year it’s paid because it’s deposited in a tax-deferred account.
In this case, though, any dividend income would be taxed along with any other funds upon withdrawal in retirement.
If an investor holds dividend funds or dividend-paying stocks in a Roth IRA, the tax treatment is different. Here, contributions are after tax, and withdrawals are tax free.
If the investment is held in a taxable account, like a brokerage account, then a dividend is considered income, and the tax rate will depend on whether it’s a qualified dividend or nonqualified (ordinary) dividend.
Tax Rate for Qualified Dividends
These are dividends paid by a U.S. corporation or a qualified foreign corporation on stock that an investor has held for a certain period of time — generally more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.
For some preferred stock, the investor must have held it for 91 days out of the 181-day period starting 90 days before the ex-dividend date. Taxes on qualified dividends (vs. ordinary dividends) are paid at long-term capital gains rates, which range from 0% to 20% based on an individual’s modified adjusted gross income.
In other words, the taxes investors pay on qualified dividends are based on their overall income tax bracket, and they could pay 0%, depending on their income. Because the long-term capital gains tax rate is lower than ordinary income tax rate, qualified dividends are preferable to nonqualified dividends.
2025 Tax Rates for Long-Term Capital Gains
Following are long-term capital-gains tax rates for the 2025 tax year, according to the IRS.
| Capital Gains Tax Rate | Income — Single | Married, Filing Jointly | Married, Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 | Up to $48,350 | Up to $64,750 |
| 15% | $48,351 to $533,400 | $96,701 to $600,050 | $48,351 to $300,000 | $64,751 – $566,700 |
| 20% | Over $533,400 | Over $600,050 | Over $300,000 | Over $566,700 |
Additionally, note that those who have net investment income and modified adjusted gross incomes (MAGIs) over $200,000 — or couples filing jointly with MAGIs over $250,000 — may have to pay the Net Investment Income Tax (NIIT). This is 3.8% on either net investment income or the excess over the MAGI limits, whichever is less.
Tax Rate for Nonqualified Dividends
The more common type of dividend is a nonqualified — or ordinary — dividend. When companies pay ordinary dividends, they’re considered ordinary income, so an investor will be taxed at ordinary income tax rates.
In general, investors should assume that any dividend they receive is an ordinary dividend unless told otherwise. (The payer of the dividend is required to identify the type of dividend when they report them on Form 1099-DIV at tax time.)
Can You Live on Dividends?
In general, retirees may want to to live off a combination of Social Security, interest income from bonds, and selling a small portion of their investments each year. The 4% retirement rule maintains that if one withdraws no more than 4% of their portfolio each year, they’ll be able to make their nest egg last — although some financial professionals believe this formula is too conservative.
Investments that pay regular dividends may shift an individual’s retirement equation by providing steady income over time that may allow them to sell fewer investments — or no investments at all.
The amount of dividends a stock pays may grow over time as companies get larger and continue to increase their profits. But the reverse is also possible; a company could stop paying dividends, choosing to reinvest its cash in business operations.
Investing with an eye toward dividend income may allow an investor to create an income stream that could supplement their Social Security and other income in retirement.
The Takeaway
Dividends — cash or stock payments from a company to qualified shareholders — are typically paid quarterly. These financial rewards can be attractive to investors, who may seek out dividend-paying companies in hopes of boosting their income or savings.
Dividends may provide a source of consistent and predictable income, which may be a helpful addition to an individual’s portfolio, depending on their investing goals. Investors may choose to use dividend income to supplement other income or to reinvest in their portfolio.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
How long do you have to hold a stock to get a dividend?
Investors must buy, or already own, shares of the stock before the ex-dividend date, which is now the same as the date of record. The date of record is when the company reviews its records to determine who its shareholders are, and who qualifies for a dividend payout. If the date of record falls on a weekend or holiday, the ex-dividend date is the business day prior, and shareholders who buy stock on or after that date will not receive a dividend until the following quarter (or relevant time period).
Are dividends taxed if they are reinvested?
Yes. Dividends that are reinvested are considered income, just like cash dividends, and must be reported on your tax return. The way you are taxed on dividends depends on whether your dividends are qualified or nonqualified. The more common type of dividend is nonqualified, and these dividends are taxed at ordinary income tax rates. Qualified dividends are taxed at long-term capital gains rates.
What happens if you see more dividends than profit?
Typically, a portion of a company’s earnings may go to paying dividends. This is known as the dividend payout ratio. Investors typically look for payout ratios that are 80% or less — meaning that the company is not paying all of its earnings in dividends.
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