What is a dividend?
When you invest, that decision
and the patience to stick with it will begin to pay dividends – and not just
figuratively! You will literally be paid something called “dividends” or
“distributions” (we will use dividends for both) from the ETFs in your
portfolio; so what are dividends? And how do they fit in with Raiz.
A dividend is a portion of a company’s earnings that is returned to
shareholders. Companies use dividends to pass on their profits directly to
their shareholders.
A company will pay a small percentage of its profits to the owner of each share
of stock.
Example:
You own 1000 shares of fictional company Mighty Oaks. Mighty
Oaks pay a dividend of 5c per Share.
\You will receive $50 (Number of Shares Owned X Dividend per
Share) in dividend income.
Dividends and ETFs
As an Raiz investor, you’ll have a portfolio of ETFs, so that raises a few more
questions…
Do ETFs pay dividends?
Yes! In short – and in fact, for the most part, dividends in ETFs are
relatively straightforward. As discussed in our “What is an ETF” blog, ETFs are
essentially a combination of shares or bonds bundled together. To put it
simply, ETFs basically just take all the dividends from the bundle of shares,
and pay all those dividends out to ETF unitholders.
So, as an ETF shareholder, you benefit from the dividends of all the companies
which are contained in your ETF.
What will Raiz do with my dividends?
With Raiz, your dividends and distributions will be automatically reinvested in
your portfolio. You can view your dividends and distribution history through
the platform, and we will aim to provide information on when the ETFs in your
portfolio will pay their dividends.
Why reinvest?
To answer this it might be useful to understand why some companies don’t pay
dividends. One reason for this, is growth. Whilst it may make shareholders
happy to receive a dividend, it may make them even happier if the company keeps
their profits and invests them to grow the business – which will in turn, can
increase the value of the stock.
We hope that by reinvesting your dividends back into your Raiz portfolio we are
investing in the growth potential of your portfolio. Another step in the
right direction, helping your spare change grow.
Now you know about dividends, let’s hope that you can start benefiting from
them soon, with Raiz. Sign up today at https://www.Raizinvest.com.au
Don’t have the Raiz App?
Download it for free in the App store or the Webapp below:
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
