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Is Dividend Just Another Word for Free Money?

When investing in stocks, companies, property, crypto and the like one is always on the lookout for good strong capital growth combined with above average dividend payouts.

Now if you are at the beginning of your investment journey then you will look at stocks that are more aggressive and re-invest your dividends as you grow your pile. Then, as life slows down somewhat, your focus may be on reaping those dividends as income.

Dividends represent a portion of a company’s profits distributed to its shareholders. They are typically paid out regularly – either monthly, quarterly, semi-annually, or annually – as a reward for holding shares in the company or asset. These payments are essentially a way for companies to share their financial success with their investors. In 2023, dividend-paying stocks on EasyEquities paid over R500 million from local markets and $3 million from the US to investors.

Dividend yield is a key metric for income-seeking investors, representing annual dividend payments as a percentage of a stock’s current market price. It gives investors an idea of potential returns from holding a stock in dividends.

Companies have different dividend payment schedules, like monthly, quarterly, semi-annually, or annually, and the yield calculations are adjusted accordingly. For instance, a company offering a 10% annual dividend yield would mean R100 in dividends for a R1000 investment over the year. If the same company pays quarterly dividends, you could potentially receive R25 each quarter, totalling R100 annually, maintaining the same yield but with varying payment timings based on the company’s distribution schedule.

As of writing:

  • AGNC Investment Corp: Annual Dividend Yield: 15%; Dividend schedule: Monthly (Jan to Dec)
  • New Hope Group: Annual Dividend Yield: 15%; Dividend schedule: Semi-Annually (May & Nov)
  • CMH Group: Annual Dividend Yield: 14%; Dividend schedule: Semi-Annually (Jun & Dec)
  • Vodafone:Annual Dividend Yield: 11%; Dividend schedule: Semi-Annually (Feb & Aug)

Future company performance affects share prices and dividends. Positive performance tends to raise shares, while poor performance may lower them. The change in price may also impact future dividend yield, which adjusts with market conditions.

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