There are two primary ways to make money through the stock market: by selling the stock for more than you paid—also known as capital gains—and by collecting a dividend. A dividend is a payment made by a company to its shareholders, most often out of the profits it generates.
For investors, dividends can be an important part of your investing strategy whether you're reinvesting them back into a stock or using the dividends as an additional income stream. "Dividends are kind of like a bonus to investors for owning the stock. They are paid regularly, usually quarterly, so investors are consistently compensated for owning the stock, even if the stock price falls," says Kevan Melchiorre, certified financial planner and co-founder of Tenet Wealth Partners. In order to receive dividend payments there is a key date you must know, the ex-dividend date.
