There are so many layers of advantages to investing.
If you make a smart long-term plan for investing, you can watch your money grow over time.
Another advantage is that you can earn dividends from the shares of the companies you’ve purchased. But what exactly happens with these dividends?
Today, we will be looking at the commission free trading app known as Webull. In particular, we will cover what happens when you earn dividends and where they go.
Dividends are your percentage of the profits made by the company that you are part owner in along with other investors.
Not all companies pay dividends, but some do. It is often the larger, well established companies that pay dividends.
How much will your dividends be worth? That depends on two factors: the number of shares you own and the dividend per share.
Each dividend paying stock has a set dividend payout per share. This could be paid out on a monthly, quarterly or even annual basis. In most cases, dividends are paid out quarterly.
Let's say you have 100 shares of a company that pays a $0.25 dividend per quarter.
You would earn $25 per quarter from this stock.
When a company begins seeing years of consistent profits, they can opt to share those profits with shareholders. It is also a good way to keep investors around, by rewarding them with regular cash payments.
However, some companies never pay dividends. For example, Berkshire Hathaway has never paid them. They believe the profits are best spent being reinvested into the company, not paid out to shareholders.
You have two choices for what to do with dividend money when it becomes available to you.
There’s always the option to pull the money out of your account as cash. But ask yourself, is there a chance you will spend it all on a new pair of gym shoes, or a winter jacket?
The goal of investing is to increase your net worth, so the smarter option for dividends is to reinvest the money. This move will buy you more shares of stock without costing you a penny.
Reinvesting your money allows you to earn compound interest.
Some investing platforms will reinvest your dividends for you automatically every quarter.
This is known as a Dividend Reinvestment Program, or DRIP.
Webull does not currently offer automatic reinvestment, but the latest updates on its site says it will in the future and will announce it to all subscribers.
Other investing apps will also let you reinvest your dividends into a fraction of a share of a stock. This is buying a fraction, or slice, of one whole stock.
Webull does not support fractional investing. So, you will need to hold onto your dividends until you can buy a whole share.
M1 Finance is a brokerage that supports dividend reinvestment and fractional shares.
It quickly became known for its extensive menu of offerings, ranging from technical indicators to simulated trading to a wide variety of advice from analysts.
Because of this deep wealth of resources, Webull caters to more seasoned traders who are actively involved in the market. It is not intended for passive, longer-term investors who may not have the need for real-time updates and financial calendars. In fact, it can be overwhelming for complete beginners to take in all the info Webull offers.
However, the app itself has a well-organized design and it is easy enough to navigate. Webull is mobile web based and desktop accessible.
Webull is offering a free stock that you can take advantage right now, but you have to act quickly, because the offer may expire without warning ahead of time.
Get your free stock (valued at $8.00 - $1,600) after opening a Webull account.
Once you receive the free stock, you can hold or sell the awarded stock that has been credited to your account. You can withdraw or used money received if you sell the free stock to buy other a different type of securities in your account.
Reinvesting your dividends is one of the wisest decisions you can make in your investing strategy.
Although Webull does not have automatic reinvesting, it may offer this soon. In the meantime, check your portfolio at least quarterly for dividends and use the money to buy more shares. Dividends will be added to the cash balance within your account when earned. Save this money up, and use it to purchase whole shares of other stocks. Your future self will appreciate this.