Lesson 7 of 8
Dividends
Getting paid to hold stocks
Some companies return cash to shareholders through dividends. Coca-Cola has raised its dividend every year for 62 years straight. Others like NVIDIA put all profits into growth.
Dividend yields in the wild
AT&T
Eye-catching yield but cut the dividend in 2022. Very-high yields often signal trouble.
Coca-Cola
62 straight years of raises. Boring, reliable income.
Johnson & Johnson
Dividend king. Raised every year since 1962.
Apple
Token yield. Apple returns capital mostly via buybacks instead.
NVIDIA
Reinvests everything into growth. Not a yield play.
Tesla
No dividend. Elon thinks dividends are a waste of capital.
Rule of thumb: if a yield is above 6%, assume the market is pricing in a cut until proven otherwise.
Dividend stocks
Steady income, usually quarterly
Often mature, stable companies
KO, JNJ, PG, ABBV
Good for retirement income
Growth stocks
No dividends, reinvest everything
Higher potential returns (and risk)
NVDA, AMZN, TSLA, META
Good for long-term wealth building
DRIP
Dividend Reinvestment Plan: automatically use dividends to buy more shares. Compound growth on autopilot. Turn it on and forget it.
Check yourself
What is a DRIP?