How Dividends Work
A dividend is cash a company pays its shareholders out of its profits. Here is how dividends are declared and paid, how often they arrive and how they are taxed in 2026.
Sharing the profits
When a mature company earns more cash than it needs to run and grow the business, it can return some to shareholders as dividends. Most U.S. companies that pay dividends do so every quarter. Coca-Cola, for example, raised its quarterly dividend to $0.53 a share in February 2026, or $2.12 a year, its 64th straight yearly increase.
The four key dates
| Date | What happens |
|---|---|
| Declaration date | The board announces the amount and schedule |
| Ex-dividend date | Buy on or after this date and you do not get this dividend |
| Record date | The company checks its list of shareholders |
| Payment date | Cash lands in your account |
With one-day settlement, the ex-dividend date and record date are usually the same day.
How dividends are taxed
Qualified dividends get lower tax rates if you hold the stock more than 60 days during the 121-day period around the ex-dividend date. For 2026, the federal rate on qualified dividends is 0% for taxable income up to $49,450 for single filers ($98,900 for married couples filing jointly), 15% above that and 20% above $545,500 ($613,700 joint). Ordinary dividends, including most REIT payouts, are taxed like wages.
Dividends in retirement accounts are not taxed each year.
Not every company pays
Fast-growing companies often reinvest everything or buy back shares instead. In our data as of Sept. 17, 2026, Apple’s dividend yield was about 0.3% and Microsoft’s about 0.7%, while several consumer staples and telecom companies yielded 3% to 6%. Neither approach is automatically better; what matters is total return.
Key takeaways
- Dividends are cash paid from company profits, usually quarterly.
- Buy before the ex-dividend date to receive the payment.
- Qualified dividends get lower tax rates if held long enough.
- Total return matters more than whether a company pays dividends.