Many beginning investors do not understand what a dividend is — as it relates to an investment—particularly for an individual stock or mutual fund. A dividend is a payout of a portion of a company's profit to eligible stockholders, typically issued by a publicly traded company.
However, not all companies pay a dividend. Usually, the board of directors determines if a dividend is desirable for their particular company based on various financial and economic factors. Dividends are commonly paid in the form of cash distributions to the shareholders on a monthly, quarterly or yearly basis.
Key Takeaways
- Dividends are a discretionary distribution of profits which a company's board of directors gives its current shareholders.
- A dividend is typically a cash payout to investors made at least once a year, but sometimes quarterly.
- Stocks and mutual funds that distribute dividends are likely on sound financial ground, but not always.
- Investors should be aware of extremely high yields, since there is an inverse relationship between stock price and dividend yield and the distribution might not be sustainable.
- Stocks that pay dividends typically provide stability to a portfolio, but do not usually outperform high-quality growth stocks.
Dividend Basics
Shareholders of any given stock must meet certain requirements before receiving a dividend payout, or distribution. You must be a "shareholder of record" on or subsequent to a particular date designated by the company's board of directors in order to qualify for the dividend payout. Stocks are sometimes referred to as trading "ex-dividend," which simply means that they are trading on that particular day without dividend eligibility. If you buy and sell stock on its ex-dividend date, you will not receive the most current dividend payout.
Now that you have a basic definition of what a dividend is and how it is distributed, let's focus in more detail on what more you need to understand before making an investment decision.
What Is the Dividend Yield?
It may be counter-intuitive, but as a stock's price increases, its dividend yield actually decreases. Dividend yield is a ratio of how much cash flow you are getting for each dollar invested in a stock. Many novice investors may incorrectly assume that a higher stock price correlates to a higher dividend yield. Let's delve into how dividend yield is calculated, so we can grasp this inverse relationship.
Dividends are normally paid on a per-share basis. If you own 100 shares of the ABC Corporation, the 100 shares is your basis for dividend distribution. Assume for the moment that ABC Corporation was purchased at $100 per share, which implies a total investment of $10,000. Profits at the ABC Corporation were unusually high, so the board of directors agrees to pay its shareholders $10 per share annually in the form of a cash dividend. So, as an owner of ABC Corporation for a year, your continued investment in ABC Corp result in $1,000 dollars of dividends. The annual yield is the total dividend amount ($1,000) divided by the cost of the stock ($10,000) which equals 10%.
If ABC Corporation was purchased at $200 per share instead, the yield would drop to 5%, since 100 shares now costs $20,000 (or your original $10,000 only gets you 50 shares, instead of 100). As illustrated above, if the price of the stock moves higher, then dividend yield drops and vice versa.
Dividends are a piece of a company's profits paid out to eligible stockholders on a monthly, quarterly or yearly basis. Generally, a company's ability to pay dividends is a sign of good corporate health.
Assessing Dividend-Paying Stocks
The real question one has to ask is whether dividend-paying stocks make a good overall investment. Dividends are derived from a company's profits, so it is fair to assume that in most cases, dividends are generally a sign of financial health. From an investment strategy perspective, buying established companies with a history of good dividends adds stability to a portfolio. Your $10,000 investment in ABC Corporation, if held for one year, will be worth $11,000, assuming the stock price after one year is unchanged. Moreover, if ABC Corporation is trading at $90 share a year after you purchased for $100 a share, your total investment after receiving dividends is still break even ($9,000 stock value + $1,000 in dividends).
This is the appeal of buying stocks with dividends—it helps cushion declines in the actual stock prices, but also presents an opportunity for stock price appreciation coupled with a steady stream of income from dividends. This is why many investing legends such as John Bogle and Benjamin Graham advocate buying stocks that pay dividends as a critical part of the total "investment" return of an asset.
The Risks to Dividends
During the financial meltdown in 2008-2009, almost all of the major banks either slashed or eliminated their dividend payouts. These companies were known for consistent, stable dividend payouts each quarter for literally hundreds of years. Despite their storied histories, many dividends were cut.
In other words, dividends are not guaranteed and are subject to macroeconomic as well as company-specific risks. Another potential downside to investing in dividend-paying stocks is that companies that pay dividends are not usually high-growth leaders. There are some exceptions, but high-growth companies usually do not pay sizable amounts of dividends to their shareholders even if they have significantly outperformed the vast majority of stocks over time. Growth companies tend to spend more dollars on research and development, capital expansion, retaining talented employees, and mergers and acquisitions. For these companies, all earnings are considered retained earnings and are reinvested back into the company instead of issuing a dividend to shareholders.
It is equally important to beware of companies with extraordinarily high yields. As we have learned, if a company's stock price continues to decline, its yield goes up. Many rookie investors get teased into purchasing a stock just on the basis of a potentially juicy dividend. There is no specific rule of thumb in relation to how much is too much in terms of a dividend payout.
Special Considerations
The average dividend yield on S&P 500 index companies that pay a dividend historically fluctuates somewhere between 2% and 5%, depending on market conditions. In general, it pays to do your homework on stocks yielding more than 8% to find out what is truly going on with the company. Doing this due diligence will help you decipher those companies that are truly in financial shambles from those that are temporarily out of favor, and therefore present a good investment value proposition.
Basic Principles of KCS
KCS, or Knowledge-Centered Service, is a methodology that allows organizations to consistently capture information and maintain an up-to-date resource for customer-facing employees. When organizations create a knowledge base for their employees to reference, contact center teams can increase first-call resolution rates while also reducing the average call time (ACT). Teams will also see improvements to agent productivity and efficiency, and an increase to both employee and customer satisfaction.
The Basic Principles of KCS outlines what this methodology entails, how to implement a KCS strategy, and what you’ll need to be successful.
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Georgia’s program for gifted students has problems with too-large class sizes, teacher training and student selection, a new report from the state auditor’s office finds.
In the 2020-2021 school year, about 199,000 Georgia students were designated as gifted, representing about 12% of the 1.7 million statewide student body. The state Department of Education says these students need “special instruction and/or special ancillary services to achieve at levels commensurate with his or her ability(ies).”
To help make sure they get that instruction, the state spends between 30% and 68% more on each gifted student based on Georgia’s Quality Basic Education formula for per-student spending. That makes the gifted program the largest non-general education program funded according to the formula.
Class sizes and instruction methods
Gifted funding is based on a ratio of 12 students per teacher, but the auditors found more than 77% of gifted classes across the state exceeded 12 students, and gifted classes averaged 23 students per teacher. That means that the state is paying a higher rate for gifted students but may not be reaping the intended benefits of more individual instruction for gifted students, the auditors found.
Gifted coordinators told auditors that a lack of resources can lead to larger classes.
The auditors found that this issue was exacerbated in larger school systems – Georgia’s 36 school systems with more than 10,000 students had an average of 23 gifted students per teacher, while 11 systems with less than 1,000 students had an average of 12 students per teacher.
The auditors recommended that the General Assembly should consider tweaking funding for gifted students in discussions about altering QBE, and the state Department of Education should periodically review gifted class sizes.
The DOE agreed with these findings but added “Georgia is a local control state, which allows school districts to choose which gifted service delivery model(s) best serve the students in the various grade bands. For all QBE categories, school districts earn funding based on a formula but are afforded flexibility per state law.”
The DOE also noted that the 1:12 ratio is the formula for funding, not a limit, and that local districts can waive class sizes under state law.
But different methods of teaching may prevent gifted students from receiving individualized attention, the auditors found.
The DOE allows eight models for gifted instruction, including resource classes, in which students are pulled out of classes one day a week for a class that can only include gifted students. Seventy percent of Georgia gifted elementary students have at least one resource class.
Other methods include cluster grouping, in which six to eight gifted students are placed in an otherwise general education classroom led by a teacher with a gifted endorsement who provides different lesson plans for both groups, and collaborative teaching, which is similar to cluster grouping, but the classroom is led by a teacher without gifted certification who is assisted in lesson planning by a teacher with certification.
Statewide, 40% of gifted elementary school students were enrolled in a class with cluster grouping and 12% had at least one collaborative teaching class.
The National Association for Gifted Children says gifted students should receive differentiated instruction – lessons that deliver them the opportunity to be challenged and grow their skills – and general education services should not replace differentiated instruction provided by models like the resource class.
“Cluster and Collaborative models, however, are at higher risk of lacking differentiation because students may have a broad array of skills in the same classroom,” the auditors found.
The education department disagreed with the audit’s recommendations to review class data and work with districts to ensure differentiation, noting that “Georgia is a local control state, which allows school districts to choose which gifted service delivery model(s) best serve the students in the various grade bands.”
Teacher training
The education department requires gifted classes to be led by teachers with gifted in-field endorsements, certificates which typically require nine to 12 hours of college credits, equaling about 200 hours of coursework, which can be expensive and time-consuming for working teachers.
The courses and field work are designed to allow teachers to nurture students’ talents and provide them with appropriately challenging work, but auditors found 7,500 of 76,000 gifted classes in the 2020-2021 school year were taught by teachers without an endorsement.
The auditors found that rural districts were more likely to have higher percentages of teachers without the endorsement, but there were also other outliers, including one suburban system in which 805 classes, half of the total gifted classes, were taught by teachers without a record of an endorsement. Only 34 systems, or about 20%, had all gifted classes taught by an endorsed teacher.
That means the state may have overpaid up to $9.7 million to gifted classes without a certified gifted teacher, the auditors estimated.
The auditors also found that about 3,800 students, about 2% of children in gifted classes, were not identified as eligible for the program and that the state may have paid an additional $3.6 million for gifted classes for ineligible students.
The education department partially agreed with the auditors’ recommendations to handle these discrepancies and said new policies are already in place starting this school year, but they noted that most of the data was collected during a time when the pandemic was at its height, which limited opportunities to attain endorsements.
Student selection and instruction
The auditors also found fault with schools’ processes for selecting students.
One problem they listed was that the DOE does not require screening all students for gifted status, which they said may cause students to miss out, especially those in disadvantaged groups.
Students can be referred by teachers, counselors or others with knowledge of their academic abilities, or they can be automatically referred if they score high on standardized tests. Referred students are reviewed by a panel, and, if approved, can be enrolled subject to parental approval.
But eligibility declines as poverty levels increase, the researchers found, and Asian and white students are overrepresented in gifted programs compared with members of other races, both in Georgia and nationally. The researchers noted that most school systems do provide universal screening, but that it is not required as it is in other states.
The National Association for Gifted Children recommends universal screening as well as steps including training for general education teachers to recognize gifted students early and providing information to parents in multiple languages.
The education department partially agreed with the auditors’ recommendations, saying it would be willing to incorporate universal screening guidance into its best practices if it were “added in state law and with additional appropriated state funding.”
The Arizona Supreme Court held that state law mandates that a single auto insurance policy that insures multiple vehicles provides different uninsured motorist coverages for each vehicle ”notwithstanding creative policy drafting intended to evade statutory requirements.”
In underlying case, Franklin v. CSAA General Insurance, Kay Franklin’s mother perished in an auto accident caused by a negligent driver. Franklin collected the per person liability limit of the negligent driver’s insurance policy of $25,000. According to the case summary, Franklin collected $25,000 under the tortfeasor’s policy and made an underinsured motorist claim under her mother’s policy with defendant CSAA General Insurance Co. Franklin’s mother had $50,000 of UIM coverage per person under her CSAA policy.
What is a CPA? And when might you need one? Although these accounting pros usually come to mind when it comes to filing income taxes, they can help with quite a few other things.
What is a CPA?
CPA stands for certified public accountant. It’s a credential an accounting professional can earn to demonstrate expertise in their field. Becoming a CPA requires passing an exam and fulfilling several education and experience requirements.
Internationally, accounting professionals with similar education and credentials are called CAs, or charted accountants.
How do you become a CPA?
To earn a CPA title, candidates must pass a 16-hour test called the Uniform CPA Examination. Before taking the exam, they must also meet an education requirement
. Typically, that means completing 120 to 150 hours of credited coursework, with a minimum of 24 hours focused on accounting and 24 hours focused on business courses .Becoming a CPA means meeting specific experience and ethics requirements, too. The state usually sets those parameters, but generally, you can’t officially be called a CPA until you’ve apprenticed under one for at least a year
Once an accountant has earned a CPA license, some work is required to maintain it. Many state boards ask certified public accountants to take additional courses throughout their careers to keep their skills sharp and up to date.
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What is the CPA exam?
The certified public accountant exam, formally called the Uniform CPA Examination, is a nationally administered test that sets the standards for the skills and knowledge CPAs must possess.
The exam has four sections: auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation. To pass, candidates must earn a score of at least 75 on each section.
What do CPAs do?
People often think of CPAs when they think about tax preparation and filing, but these professionals can work in several industries, depending on their focus. This can include tax planning, financial reporting or working as an accountant for a private or public company
.CPAs are often the people who are called in to conduct audits — assessments of a business’s paperwork and financial statement. They can also hold chief controller or chief financial officer (CFO) positions, depending on their skill level and education.
What is the difference between an accountant and a CPA?
Typically, an accountant is a person who has a degree in accounting from a higher education institution. However, this is not an official requirement because the general term “accountant” is largely unregulated in the U.S.
Accountants can provide similar services to a CPA, but CPAs are distinct from accountants in a few ways:
How can a CPA help with my taxes?
If you’re wondering how a CPA can assist you with taxes and whether you need one’s help in the first place, you can start by asking: Why do I need help, and what kind of help do I need?
If you’re not sure where to start when it comes to filing, many resources can walk you through how to file your taxes. Once you’ve got the basics down, you might find that quality tax software is often helpful enough to get your annual tax forms in — some taxpayers may even be able to do their taxes for free.
Calling in a tax-focused CPA could make sense if you’re struggling to figure something out about your tax life, have complex needs or have questions you could use extra guidance with. If you need to file for a tax extension, for example, because you need extra help with your paperwork, a tax pro can help you to get back on track.
Certain people, such as business owners and those who are self-employed, might find working with a CPA beneficial because CPAs can also provide small-business tax advisory services, aka big-picture tax and financial planning, that might be particularly helpful to these taxpayers.
Our goal for Women's Council of RIT in the coming years is to build a formidable global resource for all women alumnae and friends. Women's Council members will benefit from social friendships, networking, career support, and life knowledge sharing, while advancing RIT through fundraising and supporting current female students and prospective female students. We will be a community that advances RIT and benefits our members personally and professionally.
The RIT Women’s Council brings together alumnae, women faculty and staff, and female friends of the university who believe that by sharing our knowledge and support, great things can be achieved. Our members help female students to achieve their dreams, strengthen alumnae as they pursue challenging careers and meaningful lives, and bring our unique voices to RIT’s decision-making bodies to drive positive change.
Women’s Council members are doers and achievers. We are changing the dynamic and reshaping the conversation around what it means to be a successful, caring, and powerful person, and we are reframing the perception of RIT women in our communities, industry, and at the university.
We have a rich history as a body of well-connected and determined women who seek to enrich the lives and experiences of our members and the women who surround us. Consider joining us today to be part of the future of women at RIT.
Rotunda Rumblings
Code breaking: The “root cause” of a accurate surge in unemployment fraud in Ohio is a flaw in the state’s computer code, which has resulted in scammers bilking the state out of more than $189,000, state officials revealed Monday. As Jeremy Pelzer reports, for weeks thousands of Ohioans have had to spend hours on the phone to unfreeze their accounts because of malicious activity. The flaw was in code that linked Ohio’s unemployment benefits system and the state’s OH|ID system, which state officials previously said would make the unemployment system more secure.
Study guide: Trying to make a well-informed decision in the Aug. 8 election over State Issue 1? Andrew Tobias offers this comprehensive recap of all our news coverage of the issue.
About face: Secretary of State Frank LaRose announced on Monday that he has endorsed ex-President Donald Trump in the 2024 presidential election. Sabrina Eaton reports on the about-face LaRose, Ohio’s top elections official, made in issuing the endorsement. As recently as 2019, LaRose, who has a history of publicly criticizing Trump, had refused to endorse in the presidential election, telling a group of elections officials at the time: “I’m not endorsing candidates or showing up at campaign rallies, because … when the eyes of the world are on Ohio next year, the people of Ohio need to know that their chief elections officer is calling balls and strikes, and running fair elections in partnership with each and every one of you.” But on Monday, LaRose said, while he and Trump don’t agree on everything, “I’m giving my full endorsement and support to his campaign for President of the United States, and I look forward to working with him as a United States Senator to make America great again.”
Heated exchange: Citing record-breaking heat across the United States and world, U.S. Sen. Sherrod Brown on Monday asked the Occupational Safety and Health Administration to implement federal workplace heat standards as soon as possible, Eaton writes. Brown and U.S. Rep. Greg Casar, a Texas Democrat, led a group of Democratic U.S. Senate and House of Representatives members in a letter urging Acting U.S. Department of Labor Secretary Julie Su and Assistant Secretary for Occupational Safety and Health Douglas L. Parker to establish an enforceable federal standard to ensure workers and employers can recognize and respond to the signs of heat stress.
Dubious distinction: Despite the accurate boost in the Ohio budget to raise the state’s threshold for receiving child care subsidies from 142% to 145% of the federal poverty level, Ohio still ranks at or near the bottom nationally. Zachary Smith reports that only North Carolina has a lower threshold at 133% - or $33,063 for a family of three. But even in North Carolina, the state is more generous when it comes to caring for younger children, with the threshold at double the poverty level for children ages 0 to 5.
Pushing 60: Fifty-eight percent of Ohioans support the proposed November ballot issue that would enshrine abortion rights in the state constitution, writes Jessie Balmert of the USA Today Network Ohio bureau in the latest story recapping the results of a USA Today Network / Suffolk University poll of Ohio voters. The results are similar to a finding last December from Baldwin-Wallace University, which tabbed the number at 59%.
$25 million: Protect Women Ohio, the campaign against the abortion rights amendment, told NBC News’ Adam Edelman last week that it has committed thus far to spending $25 million for ads, which began running in March, through Nov. 7, when the amendment campaign hopes to be on the ballot. Spending on both sides is expected to be high. Ohioans United for Reproductive Rights said it plans to raise and spend $35 million.
Knock, knock: Supporters and opposers of State Issue 1 are going door to door, doing the shoe leather campaign work ahead of the Aug. 8 election. Haley BeMiller of the USA TODAY Netowork Ohio Bureau takes a look at what they’re telling voters.
Build ye houses, and dwell in them: The Center for Christian Virtue, through an affiliated organization, has purchased the Capitol Square building recently vacated by The Columbus Dispatch for $1.1 million, according to a CCV release. The five-story building, at 62 E. Broad St., will house CCV initiatives such as the Ohio Christian Education Network, the Christian Business Partnership, and the Church Ambassador Network when the CCV moves in by the end of August. The CCV already owns the building next door, at 60 E. Broad St.; the release stated the group intends to place that property up for sale “while remaining open to the possibility the Lord may provide other uses for the building.”
Hitting the airwaves: Protect Our Constitution, the official campaign group backing State Issue 1, is up with its first major ad spending of the election. The group is spending more than $1 million to run this ad through July 30 at TV stations across the state.
Full Disclosure
Here are five things we learned from the May 15, 2023 financial disclosure of state Rep. Don Jones, a Freeport Republican.
1. Along with his legislative salary, he earned income as a parts salesman for D & J Sales & Service Inc. and other income for “general labor” with Jaybird Enterprises LLC
2. He receives royalty payments from Ascent Resources
3. He reported investments in two retirement funds, a deferred compensation account, a 457 plan, and common stock with Woodsfield Savings Bank.
4. He owed Farm Credit Services, Discover Card, Key Bank, and Ohio Valley Community Credit Union each at least $1,000 at some point during the year.
5. He’s licensed as a certified basic EMT
Tick-Tock
The countdown is on for the special election to decide State Issue 1, a state constitutional amendment that would make it harder to pass future amendments. Here are the key dates to remember.
The deadline to request an absentee ballot … 7 days (Aug. 1)
Election Day... 14 days (Aug. 8)
Today’s hours for in-person, early voting: 8 a.m to 5 p.m.
Birthdays
Kristin Harris, Ohio House payroll and benefits officer
Martin L. Davey, Ohio’s 53rd governor (1884-1946)
Straight From The Source
“When you have three candidates, [where] anyone could win the general election, we don’t stay up late at night worrying about that.”
-National Republican Senatorial Committee Chairman Sen. Steve Daines, of Montana, to CBS News on Ohio’s looming 2024 Senate GOP primary to take on incumbent Sen. Sherrod Brown.
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