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A cash dividend is a distribution of a portion of a company’s earnings to shareholders. Dividends are a key benefit to owning stock. They enhance your returns and allow you to participate in a company’s success without selling your shares. Not all companies pay a cash dividend, though. A company’s board of directors decides whether or not to pay a dividend and determines the amount and frequency of the payments. You can use a company’s annual report to find out if it pays a cash dividend and if those payments are likely to continue.
Download a company’s most recent Form 10-K annual report from the investor relations section of its website or from the U.S. Securities and Exchange Commission’s online EDGAR database.Step 2
Find the section in the report called “Market for Registrant’s Common Equity and Related Stockholder Matters.” A company must disclose the amount and frequency of any cash dividend payments it declared in the past two years in this section.Step 3
Analyze the dividend payments, if any, to determine their consistency and to determine the likelihood of future payments. Just because a company paid dividends in the past does not mean the payments will continue. An increase in the amount of a regular cash dividend is a good sign that the company will maintain its payouts. A decrease or sporadic payments indicate the dividends might be in jeopardy or might be inconsistent in the future. For example, if a company increases its quarterly dividend from 10 cents per share to 12 cents per share, there is a good chance the distributions will continue.Step 4
Review the company’s dividend policy in the same section, if it includes one. This policy describes the company’s general practice of paying dividends and its inclination toward future payments. Companies that do not pay dividends say so in this section. If a company paid dividends in the past, it may or may not disclose the possibility of upcoming dividends. The SEC encourages, but does not require, a company to discuss future dividends. For example, a company might state that it intends to pay a consistent quarterly dividend and grow the dividend over time.Step 5
Review the investor relations section of the company’s website to determine whether it issued a press release or other information about changes to its dividend since it filed its Form 10-K. A company files a 10-K only once a year and might adjust its dividend policy mid-year.