Definition
A share of profits a company pays its stockholders, usually quarterly. Reinvested dividends are a large, quiet part of long-term stock returns.
Why it matters
Dividends are the part of stock returns you cannot see in a price chart, and reinvesting them is a meaningful slice of long-run market performance. They are also taxable in a brokerage account, which surprises new investors.
Example
A $100,000 index fund position with a 2% dividend yield pays about $2,000 a year. Reinvested automatically, those payments buy more shares that pay their own dividends, compounding the position.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.