DIVIDEND a slice of profit paid to shareholders, per share ownedRECORD DATE own the shares by this date to qualifyEX-DIVIDEND buy after this window, no dividend this roundDISTRIBUTION DATE the day the payment actually landsYIELD annual dividend ÷ share price, as a percentSESSION 16 Dividends and Earnings
A company that turns a profit has a choice: reinvest it, or hand a slice of it back to the people who already own the stock. That slice is a dividend, and learning to calculate it, and to know when you actually qualify for one, is this session's job.
🔒 Free to Unlock — Just Sign Up
You're reading the free preview. Create a free account (email or Google) to unlock the rest of this session: vocabulary, worked examples, charts, and every interactive tool below.
No payment, ever, for this course. Just a free account.
Background
Where Dividends Come From
When a company turns a profit, its board of directors decides what to do with it. Two main options: reinvest the earnings into the business, for expansion, new products, or modernization, or share a percentage of it directly with the people who already own the stock, in the form of a dividend. Many companies do some of both.
Dividends are generally paid quarterly and are a set dollar amount distributed to every shareholder of record on a certain date. A dividend is allocated per share, so the more shares an investor owns, the larger the dividend payment they receive.
Declaring a dividend doesn't automatically mean a company is thriving. Some companies keep paying a dividend through a slow stretch because they don't want to spook investors into thinking something is wrong, or because they don't want to break a long streak of paying one. A handful of well-known companies have paid a dividend every year for over a century, weathering plenty of downturns along the way.
Timing determines who actually gets paid:
Monday
Tuesday
Wednesday
Thursday
Friday
—
Record Date
ex-dividend period
ex-dividend period
Distribution Date
Shown here compressed into one week for clarity; the real ex-dividend period can run a month or more. If you sell your shares before the record date, you don't earn that quarter's dividend, even if you'd held the stock for most of the prior quarter. Buyers who purchase during the shaded ex-dividend window also miss that round's payment, it goes to whoever held the shares as of the record date.
Dividends earned land automatically in the cash balance of a portfolio, and that cash can be used to buy additional shares of stock in any company, not only the one that paid the dividend.
Occasionally a company pays its dividend in additional shares of stock rather than cash, which increases a shareholder's equity in the company. That's a different thing from a stock split, which replaces each existing share with a larger number of lower-priced shares while leaving the total value of the investment unchanged.
Key Terms
Vocabulary
Tap a card to flip it and reveal the definition.
Distribution Date
The date on which a dividend payment is actually made to shareholders.
Dividends
Part of a company's profits (earnings) paid to stockholders, either in cash or in additional shares.
Profit
What remains after subtracting a company's expenses from its revenue. Profit is a company's reward for successfully producing what people want to buy, at prices they're willing to pay.
P/E Ratio
A company's closing share price divided by its latest annual earnings per share. Using last year's earnings, it's a Trailing P/E; using a forecast of next year's, it's a Forward (or Projected) P/E.
Record Date
A date set by the company on which an investor must already own shares to be eligible for that round's dividend.
Stock Split
Replacing each share of stock with a larger number of lower-priced shares, while keeping the total value of the investment unchanged.
Yield
The rate of return on an investment paid in dividends or interest, expressed as a percent.
What You'll Be Able To Do
Objectives
Describe the factors that influence investment decisions.
Calculate dividends paid out to stockholders.
Materials: Activity Sheet 1: A Simple Guide to Making Money in the Stock Market · Activity Sheet 2: Calculating Dividends · Activity Sheet 3: The Performance of a Company.
Suggested time: 50 minutes.
Warm-Up
Extra Credit
Think back to a test or a project where you picked up extra credit. It wasn't required, it wasn't guaranteed, and it wasn't why you did the work in the first place, but it landed on top of your grade anyway.
How might extra credit be beneficial? How might it be detrimental? What's the parallel to a dividend?
DiscussionExtra credit is beneficial in that it's a bonus on top of the grade you'd otherwise earn; it can be detrimental if a student starts relying on it instead of doing the core assignments well. A dividend works the same way inside a portfolio: it's a bonus a company voluntarily hands its shareholders on top of whatever the stock itself is worth, not a substitute for picking a fundamentally sound company. Chasing a stock for its dividend alone, while ignoring a shaky underlying business, is the investing equivalent of banking on extra credit instead of the coursework.
Why might someone choose to invest in a dividend-paying stock? What's a risk of doing so?
DiscussionDividends give an investor cash flow even in a quarter where the share price barely moves, they're a signal a company is profitable and confident enough to share the proceeds, and the payments can be reinvested to buy still more shares. The risk: a dividend is never guaranteed, a company can reduce or eliminate one at any time, and a stock with an unusually high dividend yield can sometimes be a warning sign of a struggling share price rather than a healthy company.
Activity Sheet 1
A Simple Guide to Making Money in the Stock Market
Before picking a team's first investments, it helps to know the two basic ways a portfolio actually earns money. Supply and demand drive the first: a stock in high demand can be sold for a profit. Company profits drive the second, in the form of dividends.
Most smart investors stay in the market for the long haul, riding out daily ups and downs to let their investment grow over years. Social, economic, and political events, taxes, monetary policy, unemployment, holiday-season buying, a national crisis, even the weather, can all move stock prices in the short run.
Two Ways to Profit
Buy low and sell high, on the price itself. Or hold a stock in a company that shares its profits, and collect the dividend along the way. A company that's doing well can reinvest its earnings for expansion, develop new products with them, or pass a percentage back to shareholders, often some mix of all three.
Purchasers who buy a stock during its ex-dividend window don't receive that round's payment, and dividends can arrive as cash or as additional shares (which is not the same thing as a stock split). Most of the money a portfolio makes or loses, though, comes from price appreciation rather than dividends, buying low and selling high. And no amount of research changes the market's oldest rule: caveat emptor, let the buyer beware. Nothing is ever guaranteed to turn a profit.
Q1
How does an investor make money from an investment?
DiscussionTwo ways: buying a stock low and selling it at a higher price, and holding stock in a company that shares its profits with shareholders in the form of dividends.
Q2
What do companies usually do with profits that are left after all expenses are paid?
DiscussionThey either reinvest the profits back into the business, or share a portion with shareholders as dividends, and often some combination of both.
Q3
What factors can influence the price of a stock?
DiscussionSocial, economic, and political issues and events: taxes, monetary policy, war, unemployment, holiday-seasonal buying, a national crisis, even the weather, can all move stock prices.
Q4
Why do some companies continue to pay dividends even when they're not having a good year?
DiscussionSometimes to avoid scaring off investors into thinking the company is in worse shape than it is, and sometimes to avoid breaking a long-standing corporate history of reliably paying a dividend year after year.
Q5
Can Stock Market Game portfolios earn dividends? Explain.
DiscussionYes. A team's portfolio is automatically credited with the cash value of any dividends its stock has earned, and that cash can be used to buy more shares in any company, not just the one that paid the dividend. Selling right before the record date, though, forfeits that quarter's dividend.
Q6
How will the information you learned from this reading influence your plans for investing as a member of your team?
DiscussionOpen discussion, there's no single right answer. Some students may weigh dividend history more heavily when choosing stocks; others may decide price appreciation matters more over a short game window, since most of a portfolio's gains typically come from price movement rather than dividends.
Q7
How might the information you learned influence real-life investment decisions? How do these decisions differ from the decisions you make as a team member?
DiscussionOpen discussion. A real investor typically has a much longer time horizon than a several-month game and might weigh dividends more heavily as a source of steady income, particularly closer to retirement, while a short game period rewards price movement more than dividend income.
Activity Sheet 2
Calculating Dividends
For each situation below, work out the dividend, or the profit or loss, for the investor described. Every buy or sell transaction carries a $5 commission fee unless the situation says otherwise.
Situation 1
Company A has 4 investors: Investor 1 holds 100 shares, Investor 2 holds 150, Investor 3 holds 500, and Investor 4 holds 625. After a good quarter, Company A pays a one-time dividend of $3 per share. Calculate the dividend paid to each investor.
Company B has 2 investors: Investor 1 holds 1,000 shares, Investor 2 holds 1,500. After a good year, Company B pays a $1.50 annual dividend per share owned. Calculate the dividend each investor will be paid by year end.
Multiply each investor's shares by the $1.50 dividend. Investor 1: 1,000 × $1.50 = $1,500. Investor 2: 1,500 × $1.50 = $2,250.
Situation 3
Company C is new. Even though it had a good quarter, it decides not to pay a dividend. What can the company do with the extra earnings instead?
DiscussionIt can reinvest the earnings back into the company itself, for example toward growth, new products, or paying down debt, rather than distributing them to shareholders.
Situation 4
Company D has 4 investors holding 200, 350, 725, and 975 shares. After a good quarter, it decides not to pay a dividend. Investor 1 sells all 200 shares, bought originally at $10/share, now trading at $25/share. There's a $5 commission on both the buy and the sell. Calculate the investor's net profit or loss.
Cost to buy: (200 × $10) + $5 commission = $2,005. Proceeds from selling: (200 × $25) − $5 commission = $4,995. Net profit: $4,995 − $2,005 = $2,990.
Situation 5
Company E has the same 4 investors as Company D. After a bad quarter with no dividend, Investor 3 sells all 725 shares, built up in three purchases: 200 shares at $10, 300 shares at $25, and 225 shares at $50, each purchase carrying its own $5 commission. The stock is now trading at $25/share, sold in one transaction with a single $5 commission. What profit, if any, did the investor make?
Shares / price
Cost
Commission
Total cost
200 @ $10
$2,000
$5
$2,005
300 @ $25
$7,500
$5
$7,505
225 @ $50
$11,250
$5
$11,255
Total cost: $2,005 + $7,505 + $11,255 = $20,765. Total sale value: (725 × $25) − $5 commission = $18,120. $18,120 − $20,765 = a $2,645 loss, not a profit.
Situation 6
The Situation 5 investor also received a one-time $10-per-share dividend back when they held 500 shares. How does that change their net profit or loss?
Dividend received: 500 × $10 = $5,000. Applied against the $2,645 loss: $5,000 − $2,645 = a $2,355 profit.
Math Behind the Market · Thinking Algebraically
The Dividend Payment Formula
Dividend Payment = (Dividend per share) × (Number of shares)
Rearrange it to solve for either factor, if you know the total payment and one of the two inputs, divide instead of multiplying.
Q1
Carol has 7,400 shares of a stock paying a $0.40 dividend per share. What will her dividend payment be?
$0.40 × 7,400 = $2,960.00.
Q2
Lilliana owns 1,560 shares of a stock paying a $0.28 dividend per share. How much is her dividend payment?
$0.28 × 1,560 = $436.80.
Q3
Jon's stock pays $0.78 per share, and he owns 7,980 shares. How much will he receive in dividends?
$0.78 × 7,980 = $6,224.40.
Q4
Hanna has 980 shares paying $0.354 per share. What's her dividend payment? How much over three dividend payments?
$0.354 × 980 = $346.92 per payment. Over three payments: $346.92 × 3 = $1,040.76.
Q5
Irene received a $1,418.75 dividend payment from her 6,250 shares. How much was the payment per share?
$1,418.75 ÷ 6,250 = $0.227 per share.
Q6
Darryl received a $72.75 dividend payment from a $0.15-per-share dividend. How many shares does he own?
$72.75 ÷ $0.15 = 485 shares.
Q7
Leigh received $2,016.70 in dividends for her 6,020 shares. How much did the company pay per share?
$2,016.70 ÷ 6,020 = $0.335 per share.
Q8
Robert owns 680 shares which paid him a total dividend of $155.04. How much was the dividend per share?
$155.04 ÷ 680 = $0.228 per share.
Interpreting Statistics
Earnings Per Share, Six Companies
Use the chart below, showing earnings per share (EPS) for six companies, to answer the questions that follow.
Company A, C, D, ECompany B · lowest EPSCompany F · highest EPS
Q1
Which company shows the greatest earnings per share?
Company F, at $50.
Q2
Which company shows the least earnings per share?
Company B, at $9.
Q3
What's the difference in earnings per share between the greatest and the least?
$50.00 − $9.00 = $41.00.
Q4
Which companies have greater earnings per share than Company A?
Companies C, E, and F all exceed Company A's $22.
Q5
Which companies have earnings per share less than $25?
Companies A, B, and D.
Communicating Quantitative Information
Advising a Client on a Tuition Bill
Pretend you're a financial advisor. A client wants to sell some investments to cover a $5,000 tuition bill. Here's their portfolio:
Stock
Current Price
Shares
Price 1 Year Ago
Dividend?
A
$40
200
$31
—
B
$102
125
$100
$2.50 / quarter
C
$36
150
$32
—
D
$68
250
$63
$1.50 / quarter
E
$52
100
$54
—
Dividends have been paid four times over the course of the investment, and will be paid again in two weeks.
Q1
Calculate the gain (or loss) per share for each stock.
Current price − price 1 year ago. A: $40 − $31 = $9. B: $102 − $100 = $2. C: $36 − $32 = $4. D: $68 − $63 = $5. E: $52 − $54 = −$2 (a $2 loss per share).
Q2
Calculate the overall gain or loss for each stock, not including dividends.
The client wants to sell the stock that showed the smallest growth over the past year. Which stock is that?
Stock B had the smallest positive result, $250. But Stock E actually lost money, −$200, which is lower still. Counting losses, Stock E showed the smallest (worst) growth for the year.
Q4
Now calculate the gain or loss for each stock, including dividend income (dividends paid four times over the year).
Add dividend × shares × 4 quarters to each stock's price gain. A (no dividend): $1,800. B: $250 + ($2.50 × 125 × 4 = $1,250) = $1,500. C (no dividend): $600. D: $1,250 + ($1.50 × 250 × 4 = $1,500) = $2,750. E (no dividend): still −$200.
Q5
Which stock now has the smallest profit?
Stock C, at $600, has the smallest amount among the stocks that actually turned a profit. Stock E is technically lower still at −$200, but that's a loss, not a profit, so it sits outside the comparison this question is asking.
Q6
Which stock would you advise the client to sell? Why?
DiscussionSelling Stock A ($1,800), Stock C ($600), and Stock D ($2,750) together raises $5,150, enough to cover the $5,000 bill. That combination also leaves Stock B and Stock E untouched, Stock E because it's sitting at a loss and selling now would lock that loss in, and Stock B because its upcoming dividend payment is only two weeks away.
Tackling Complex Problems
Reinvesting Dividends Over Time
These three problems track dividend reinvestment across several rounds, factoring in a broker's fee on top. Work through each investor's full timeline before checking the answer.
1. Sarah & Company G
Sarah bought 4,900 shares of Company G at $65.67/share. Company G paid a $0.15 dividend, then she sold 1,000 shares at $60.28 each, the remaining 3,900 shares later earned a $0.165 dividend, then another $0.165 dividend, and finally she sold all remaining shares for $69.07. A 2% broker's fee applies to every buy or sell transaction. How much did Sarah earn or lose overall?
Step
Calculation
Result
Initial investment
4,900 × $65.67
$321,783.00
Dividend 1
$0.15 × 4,900
$735.00
Sell 1,000 shares
(1,000 × $60.28) − 2% fee
$59,074.40
Dividend 2 (3,900 sh. remain)
$0.165 × 3,900
$643.50
Dividend 3
$0.165 × 3,900
$643.50
Sell remaining 3,900 shares
(3,900 × $69.07) − 2% fee
$263,985.54
Sale proceeds ($59,074.40 + $263,985.54 = $323,059.94) plus dividends ($735.00 + $643.50 + $643.50 = $2,022.00), minus the initial investment ($321,783.00): $325,081.94 − $321,783.00 = a $3,298.94 gain.
2. Emilio & Company T
Emilio bought 23,500 shares of Company T at $34.30/share, then received a $0.355 dividend, reinvested at $33.81/share. Assume no broker's fees for this one.
Step
Calculation
Result
Initial investment
23,500 × $34.30
$806,050.00
Dividend
$0.355 × 23,500
$8,342.50
New shares bought
$8,342.50 ÷ $33.81
246.75 shares
Total shares now
23,500 + 246.75
23,746.75 shares
To recoup the original $806,050.00 at a later price of $38.84/share: $806,050.00 ÷ $38.84 = 20,753.10 shares would need to be sold.
3. Peter & Company H
Peter bought his wife 5,000 shares of Company H at $40.51/share. The stock paid four dividends, each $0.227/share, and each time Peter reinvested the payout into more shares, at $41.43, $42.00, $38.77, and $43.32 respectively. He then sold everything at $49.06/share. A 2% broker's fee applies to every transaction, buying, reinvesting, and selling, excluding the receipt of the dividend itself.
Step
Shares held
Dividend paid
Fee (2%)
Net to invest
New price
Shares bought
Initially
—
—
$4,051.00
—
—
5,000.00
1st payment
5,000.00
$1,135.00
$22.70
$1,112.30
$41.43
26.85
2nd payment
5,026.85
$1,141.09
$22.82
$1,118.27
$42.00
26.63
3rd payment
5,053.48
$1,147.14
$22.94
$1,124.20
$38.77
29.00
4th payment
5,082.48
$1,153.72
$23.07
$1,130.65
$43.32
26.10
Sale
5,108.58
—
$5,012.54
Gross $250,626.93 − fee = $245,614.39
Initial investment: 5,000 × $40.51 = $202,550.00. Final sale proceeds, net of the 2% fee: $245,614.39. $245,614.39 − $202,550.00 = a $43,064.39 gain, following the same "final sale minus initial investment" method used in Sarah's problem above (the $4,051.00 initial-purchase fee is calculated for reference but, matching Sarah's problem, isn't subtracted a second time in the final total).
Activity Sheet 3
The Performance of a Company
Research one company using both online sources and materials the company itself publishes, then complete the following in preparation for a "buy" or "no buy" recommendation to your team.
What industry does this company belong to?
How has the company performed in the past year compared to the rest of its industry?
How has it performed the last quarter compared to the rest of the market?
Has the company declared a dividend? If so, how much per share, and how does that affect your view of buying the stock?
Has the company declared a stock split in the last 3 years? If so, what was it?
Rate the company's "health" from 1 (excellent) to 4 (poor), and explain your rating.
What information does the P/E ratio provide?
Based on the dividend yield, would this be a good long-term investment? Why or why not?
What additional information can you gain from the company's profit and loss statements?
Sample Response: Kellogg's (K)
The market-cap, revenue, and earnings figures below are from the era long past and not current data, don't use them for an actual investment decision, pull fresh numbers from a live source such as a brokerage platform or the company's investor relations page instead.
Industry: Foods / Consumer Goods. Dividend: $1.40/share, a point in favor of buying. Stock split: none in the prior 3 years. Health rating: 2, a cereal maker posting a higher quarterly profit on a 7% rise in sales, helped by pricing that offset rising commodity costs, a product category people tend to keep buying even in a weakening economy. P/E ratio: explains the relationship between the price a stock sells for and what it earns per share; Kellogg's P/E sat in line with its direct competitors. Dividend yield: solid but not exceptional, not on its own a reason to buy the stock. P&L takeaway: quarterly profit beat both the prior year and analyst forecasts, a sign the stock was doing better than expected.
Assessment · Application · Enrichment
Putting It Together
Assessment: using a financial site such as Yahoo Finance, a brokerage platform, or the company's own investor relations page, look up the current dividend per share for each stock below and calculate what it would pay out on 100 shares. These change constantly, so pull live numbers rather than relying on any figure printed in a worksheet.
Stock
Ticker
Dividend Per Share
Dividend for 100 Shares
Kraft
KFT
Hershey
HSY
Kellogg
K
British Petroleum
BP
ExxonMobil
XOM
Bank of America
BAC
Novice
Look up and complete the dividend row for just one company from the table above, and calculate its payout on 100 shares.
Apprentice
Complete the table for at least three companies. Which pays the highest dividend per share? Which pays the highest total on 100 shares, and is it the same company?
Master
Complete the full table. For each company, note its industry and one factor (KFT/Hershey: consumer staples stability; BP/XOM: commodity price exposure; BAC: interest-rate sensitivity) that might explain why its dividend sits where it does relative to the others.
Grand Master
Complete the table, then build a case for or against building a portfolio around these six dividend payers specifically, versus a portfolio chosen mainly for expected price appreciation. Use each company's dividend yield (dividend per share ÷ current share price) as part of your argument.
Application: Complete Activity Sheet 2 and have each team present its answer to one situation. What companies has your team chosen, and how did you measure their financial health?
Enrichment: Using Activity Sheet 3 as a guide, gather information on a company you're considering, in preparation for a buy/no-buy recommendation to your team.