Dividends: What They Are, How They Work and How to Invest

2023-07-10 02:48:37

Dividends are a portion of a company’s earnings that are distributed to its shareholders. If you own stock in a company, you can receive dividends, making it an excellent way to earn passive income.

Understand the Meaning of Dividends

When you buy a share of a company, you become part of it, and if that company performs well, it may decide to share its profits with you through dividends.

Know the Different Types of Dividends

Dividends can come in many forms, such as cash (cash dividends), additional shares (stock dividends), or even ownership (property dividends). The most common are cash dividends.

Learn How to Invest in Dividends

Investing in dividends involves buying shares of companies with a consistent history of paying dividends. It is crucial to research the financial health of the company and its ability to generate profit. That way, you can count on a steady stream of income.

Discover the Best Stocks to Receive Dividends

The best dividend stocks are usually from stable, well-established companies. In 2023, the companies below topped the ranking of the highest dividend payers.

Company
Code
Segment
Dividend Yield 2023 until May 31 (%)
Informed dividends and JCPs (amount per share in BRL)
Average Daily Volume (millions of BRL)

Grendene GRND3 Footwear 21.73 1.31 16,798 Metal Light LEVE3 Automobiles and motorcycles 14.56 4.36 9,538 Siderúrgica Nacional CSNA3 Steel 12.39 1.80 133,639 Petrobras PETR4 Exploration, refining and distribution 11.67 2.86 1,625,917 CSN Mining CMIN3 Metallic minerals 11.00 0.45 39,297 Petrobras PETR3 Exploration, refining and distribution 10.20 2.86 402,603 ​​Auren AURE3 Electricity 10.18 1.50 59,039 Taurus Weapons TASA4 Weapons and ammunition 9.71 1.30 10,839 Irani RANI3 Packaging 6.93 0.56 8,652 Energias BR ENBR3 Electricity 6.83 1.42 81,358 Copasa CSMG3 Water and sanitation 6.34 0.99 34,706 CPFL Energia CPFE3 Electricity 6.33 2.10 64,414 Caixa Seguridade CXSE3 Seguradoras 6, 11 0.51 20,417 Log Com Prop LOGG3 Property exploration 5.69 0.92 7,353 BBSeguridade BBSE3 Seguradoras 5.55 1.87 196,964 Alupar ALUP11 Electricity 5.54 0.50 28,262 Agricultural SLC SLCE3 Agriculture 5.53 2.36 64,885 Sanepar SAPR4 Water and sanitation 5.49 0.19 7,816 Positive POSI3 Computers and equipment 5.48 0.51 17,850 Sanepar SAPR11 Water and sanitation 5.45 0.19 21,609 Neoenergia NEOE3 Electricity 5.42 0.84 23,397 JHSF Part JHSF3 Incorporações 4.77 0.24 13,929 Telef Brasil VIVT3 Telecomunicações 4.73 1.77 97,224 Engie Brasil EGIE3 Electricity 4.71 1.78 74,344 Usiminas USIM5 Siderurgia 4.59 0.33 101,550 Bradesco BBDC3 Banks 4.58 0, 62 93,738 Bradesco BBDC4 Banks 4.48 0.68 798,074 Kepler Weber KEPL3 Máq. and equip. industrial 4.32 0.43 14,915 Bradespar BRAP4 Metallic minerals 4.16 1.24 75,180 Banrisul BRSR6 Banks 4.15 0.40 16,888

FONTE: TRADEMAP

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Learn How to Receive Monthly Dividends

Some investors choose an investment strategy focused on receiving monthly dividends. For this, you need to invest in several companies that pay dividends in different months.

Understand Taxation on Dividends

In Brazil, dividends are exempt from income tax for investors, making investing in stocks even more attractive.

Difference between Dividends and Interest on Equity

Dividends and Interest on Equity (JCP) are two ways for companies to distribute profits to shareholders, but they have different tax treatment. JCP is deductible for the company but taxable for the shareholder, while dividends are tax-free for the shareholder.

Do Mutual Funds and ETFs Pay Dividends?

Yes, Investment Funds and ETFs (Exchange-Traded Funds) can also pay dividends, depending on the fund’s strategy and the type of assets in which they invest.

How to Track Dividend Payments

You can track dividend payouts through investment platforms, corporate investor relations websites, and financial websites that provide dividend information.

Conclusion: How to Live off Dividends

Living on dividends is a goal that many investors have. It requires patience, strategy and, of course, investments in the right companies. But with time and the right strategy, it is possible to create a reliable source of passive income through dividends.

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