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What is a Dividend Rate?

The dividend rate is basically just the value of the annual dividend of a company, stated as the monetary value. Not to be confused with the dividend yield, or the dividend growth rate, both of which are percentages.

Dividend yield and dividend rate are slightly different from one another. The dividend yield is the size of a dividend in relation to the share price, and is stated as a percentage. The dividend rate is actually the amount of money paid out per share, per year, stated as a dollar amount.

So the dividend rate of a stock this year might be $2.00, and its dividend yield might be 2%. The dividend rate might alternatively be $0.50 a quarter, with the same yield of 2%.

Once a company has set it’s dividend policy and frequency, it is unlikely to change it. The dividend rate on preferred stock and bonds will not change, but the dividend on common stock will fluctuate with earnings, if it is paid at all.

If you aren’t completely sure what a dividend is, it is an amount paid to shareholders, on a per-share basis, when the company is profitable and has chosen not to retain the earnings. This is also different than the dividend growth rate, which is the increase in a dividend payout from year to year.

Keywords: dividends, corporate bonds, preferred stock, dividend yield, common stock, dividend rate, dividend growth rate,