Dividends Explained

Getting Paid to Own Stocks

Some companies share their profits with shareholders through dividends — regular cash payments, typically every three months. You don't have to do anything. You just own the stock, and money shows up.

How Dividends Work

A company announces it will pay, say, $0.50 per share per quarter. If you own 100 shares, you get $50 every three months, or $200 a year.

The key metric is dividend yield:

Dividend Yield = Annual Dividend ÷ Stock Price

A $100 stock paying $3 a year has a 3% yield — similar to what you might earn in a high-yield savings account, but with the added potential of the stock price rising too.

Who Pays Dividends?

• Mature, profitable companies — Coca-Cola, Johnson & Johnson, Procter & Gamble
• Utilities and REITs — often have the highest yields
• Banks and insurers — reliable dividend payers

Who doesn't pay dividends?

• High-growth tech (Amazon, Tesla, Meta for years) — they reinvest every dollar into growth
• Unprofitable companies — you can't pay out profits you don't have

Dividends in FSL

Most FSL scoring is based on price performance, not total return including dividends. So dividends usually don't directly boost your score.

But dividends still matter as a signal:

• A consistent dividend = a mature, stable company (lower risk)
• A growing dividend = management is confident in future earnings
• A suspended or cut dividend = major red flag

Dividend-paying stocks are the "defensive linemen" of your portfolio — not flashy, but they keep your team from collapsing on bad days.