Annual Dividend
Annual dividend is the total dividend payment made by a stock or fund in one year. For quarterly payers, it equals four times the current quarterly amount.
Glossary
Dividend glossary
Clear definitions of dividend investing terms, written in simple English for beginners, income investors, and anyone who wants less jargon.
This glossary explains the terms you see in dividend screeners, stock pages, fund pages, brokerage accounts, and retirement articles. The goal is simple: help people understand the language of dividend investing without needing to open ten other tabs.
If a term has an abbreviation, the long form is included. Many entries also link to related terms so readers can keep learning naturally.
50 glossary terms available.
A
B
Beta
Beta measures how much a stock or fund tends to move relative to the S&P 500. Beta of 1.0 moves with the market. Below 1.0 is less volatile. Above 1.0 amplifies market moves in both directions.
C
Capital Gains
Capital gains are the profit earned when you sell an investment for more than you paid. Held over one year: taxed at lower long-term rates (0%, 15%, 20%). Held under one year: taxed as ordinary income.
Cash Payout Ratio
Cash payout ratio is dividends paid divided by free cash flow — rather than earnings. It's often a more reliable measure of dividend sustainability because free cash flow is harder to manipulate than reported earnings.
Common Stock
Common stock represents ownership in a company. Common shareholders have voting rights, participate in company growth, and may receive dividends — but are last in line during bankruptcy after creditors and preferred shareholders.
Cost Basis
Cost basis is the original price you paid for an investment, including any commissions. It's used to calculate capital gains (or losses) when you eventually sell.
D
Distribution Yield
Distribution yield is the annualized income a fund distributes, divided by its current share price. For covered call ETFs and bond funds, it is the more accurate yield measure than dividend yield.
Dividend Aristocrat
A Dividend Aristocrat is an S&P 500 company that has increased its dividend every year for at least 25 consecutive years while meeting minimum size and liquidity requirements.
Dividend Capture Strategy
Dividend capture is a trading strategy where an investor buys a stock just before its ex-dividend date to collect the dividend, then sells shortly after. It rarely works as intended because the stock price typically falls by the dividend amount on ex-date.
Dividend Coverage Ratio
Dividend coverage ratio measures how many times over a company could pay its current dividend from its earnings or free cash flow. A ratio above 2.0x is generally considered healthy.
Dividend Cut
A dividend cut is when a company reduces its regular dividend payment. It is one of the most feared events for income-focused investors because it signals financial stress and immediately reduces portfolio income.
Dividend Growth Rate
Dividend growth rate is the annualized percentage increase in a company's or fund's dividend payments over a given period — typically measured over 1, 3, 5, or 10 years.
Dividend King
A Dividend King is a company that has increased its dividend for 50 or more consecutive years. As of 2026, approximately 53 U.S. companies hold this distinction.
Dividend Safety
Dividend safety is an assessment of how likely a company is to maintain or grow its dividend over the next 1–3 years. It draws on payout ratio, free cash flow, debt levels, and business stability.
Dividend Trap
A dividend trap is a high-yield investment that looks attractive because of its elevated payout, but where the yield is artificially high due to a falling share price — and the dividend is likely to be cut.
Dividend Yield
Dividend yield is the annual dividend payment divided by the current share price, expressed as a percentage. A stock paying $4 per year at a $100 price has a 4% yield.
Dollar-Cost Averaging
Dollar-cost averaging is the practice of investing a fixed dollar amount at regular intervals — monthly, quarterly — regardless of whether the market is up or down.
DRIP (Dividend Reinvestment Plan)
A DRIP automatically uses your dividend payments to purchase additional shares rather than depositing cash. Most major brokerages offer it for free on stocks and ETFs.
E
Earnings Per Share (EPS)
Earnings per share (EPS) is a company's net profit divided by the number of outstanding shares. It shows how much the company earns for each share owned.
ETF (Exchange-Traded Fund)
An ETF is a fund that holds a collection of investments — stocks, bonds, real estate — and trades on a stock exchange like an individual share. It typically tracks an index and charges very low annual fees.
Ex-Dividend Date
The ex-dividend date is the cutoff date to own a stock in order to receive the next declared dividend. Buy before this date and you get paid. Buy on or after it and you don't.
Expense Ratio
Expense ratio is the annual fee an ETF or mutual fund charges as a percentage of your invested assets. A 0.06% expense ratio on a $100,000 investment costs $60 per year.
F
Free Cash Flow
Free cash flow is the cash a company generates after paying for its operating expenses and capital expenditures. It is the money available for dividends, debt repayment, share buybacks, or reinvestment.
Funds from Operations (FFO)
Funds from operations (FFO) is the standard metric for measuring a REIT's operating performance. It adds back depreciation and amortization to earnings and excludes gains or losses from property sales.
I
Income Investing
Income investing is a strategy focused on building a portfolio that generates regular cash income — through dividends, bond interest, real estate distributions, or other payouts — rather than emphasizing price appreciation.
M
Margin of Safety
Margin of safety is the buffer between what an investment is worth and what you pay for it — or between what a company earns and what it pays as dividends. A larger margin means more protection if estimates turn out to be wrong.
Mutual Fund
A mutual fund pools money from many investors to buy a diversified collection of securities. Unlike ETFs, mutual funds price at end of day and are bought directly from the fund company rather than on a stock exchange.
N
NAV (Net Asset Value)
Net asset value (NAV) is the per-share value of a fund's underlying holdings, calculated by dividing total assets minus liabilities by the number of outstanding shares.
O
Ordinary Dividend
An ordinary dividend is a dividend taxed at your regular income tax rate rather than the lower capital gains rate that applies to qualified dividends.
P
P/E Ratio (Price-to-Earnings)
P/E ratio is a stock's share price divided by its annual earnings per share. A P/E of 20 means investors are paying 20 dollars for every dollar of annual earnings.
Payment Date
Payment date is when dividend cash actually arrives in your brokerage account. It typically falls 2–4 weeks after the ex-dividend date and record date.
Payout Frequency
Payout frequency describes how often a company or fund distributes dividends — typically monthly, quarterly, semi-annually, or annually. Most U.S. stocks and ETFs pay quarterly.
Payout Ratio
Payout ratio is the percentage of a company's earnings paid out as dividends. A 50% payout ratio means the company pays half its earnings to shareholders and retains the other half.
Portfolio Yield
Portfolio yield is the weighted average dividend yield across all positions in your investment portfolio, showing your overall income return as a percentage of total portfolio value.
Preferred Stock
Preferred stock is a class of shares that pays a fixed dividend before common stockholders receive anything. It sits between bonds and common stock in the capital structure — with more reliable income than common stock but less upside.
Q
Qualified Dividend
A qualified dividend is a dividend that meets IRS requirements to be taxed at the lower capital gains rate (0%, 15%, or 20%) rather than your ordinary income rate.
R
Record Date
The record date is when a company checks its official shareholder list to determine who receives the upcoming dividend. You must appear in the company's records on this date to receive payment.
REIT (Real Estate Investment Trust)
A REIT is a company that owns income-producing real estate and is legally required to distribute at least 90% of its taxable income as dividends. REITs let ordinary investors own real estate without buying property directly.
S
Safe Withdrawal Rate
Safe withdrawal rate is the percentage of a portfolio you can withdraw annually — adjusting for inflation each year — with a high probability of never running out of money over a 30-year retirement.
Sector Diversification
Sector diversification means spreading investments across different industries and business types so that a downturn in one area doesn't devastate the whole portfolio.
Sequence of Returns Risk
Sequence of returns risk is the danger that poor market returns early in retirement — when you're withdrawing money — permanently damage a portfolio even if long-run average returns look fine.
Special Dividend
A special dividend is a one-time, irregular cash payment made to shareholders — distinct from the regular quarterly or monthly dividend. Companies often pay special dividends when they have excess cash from asset sales, unusually strong earnings, or accumulated cash.
Stock Buyback (Share Repurchase)
A stock buyback is when a company uses its own cash to repurchase shares from the market, reducing the number of outstanding shares. This increases earnings per share and dividend per share for remaining shareholders.
Stock Split
A stock split divides existing shares into more shares at a proportionally lower price. A 2-for-1 split turns 100 shares at $200 into 200 shares at $100. Total value is unchanged.
T
Tax-Advantaged Account
A tax-advantaged account is a retirement or savings account that receives special tax treatment — either tax-free growth (Roth IRA), tax-deferred growth (traditional IRA, 401(k)), or both.
Taxable Brokerage Account
A taxable brokerage account is a standard investment account with no special tax treatment. Dividends, interest, and realized capital gains generate tax bills each year — unlike retirement accounts that defer or eliminate those taxes.
Total Return
Total return is the complete gain or loss from an investment including both price appreciation (or depreciation) and any income received — dividends, interest, or distributions.
V
Valuation
Valuation refers to how expensive or cheap a stock is relative to its underlying business metrics — earnings, free cash flow, book value, or dividends. Buying at a reasonable valuation provides a margin of safety.
Volatility
Volatility measures how much an investment's price fluctuates over time. High volatility means larger price swings up and down. Low volatility means more stable, predictable price movement.
Y
Yield on Cost
Yield on cost is your annual dividend income divided by what you originally paid for the investment — not the current market price. It shows how your personal income return has grown over time.