Cash Dividends Explained
A cash dividend is the most common form of dividend: a direct cash payment per share, deposited into your brokerage account on the pay date.
The mechanics
After the board declares a cash dividend, the company sets an ex-dividend date and a record date to fix who is entitled to it, then sends the cash on the pay date. If you hold the shares before the ex-dividend date, the payment is yours even if you sell the next day.
Cash dividends are paid per share, so the amount you receive scales with how many shares you own. The per-share figure is what gets quoted; multiply by your share count for your actual payment.
Cash versus stock dividends
A stock dividend pays you additional shares instead of money, which increases your share count without putting cash in your pocket. Cash dividends are simpler and far more common among established dividend payers.
Reinvesting the cash
Many investors automatically reinvest cash dividends to buy more shares through a dividend reinvestment plan, compounding the income over time rather than spending it.