What Are Stock Dividends and How to Take Advantage of Them in Practice

Revenue in shares refer to the amounts paid by a company to its shareholders, usually from the profits generated.

In short, investing in stocks is a smart way to make your money grow over time.

But did you know that, in addition to the appreciation of shares, it is possible to earn from share dividends? This concept is essential for anyone who wants to build a passive income strategy.

Let's understand what dividends are, how they work and, most importantly, how you can take advantage of them in your investment portfolio.

What are Dividends and What are the Most Common Types?

Dividends are payments made by companies to their shareholders as a way of distributing part of their profits or rewarding them for their trust in the business.

They represent one of the great attractions for those who invest in shares of solid companies with good results, as it is a way to guarantee a regular extra income, even without selling the shares.

The most common types of income are:

• Dividends: Distribution of company profits to shareholders. There is no income tax charged to individuals in Brazil.
• Interest on Equity (JCP): A way of distributing profits, but with a 15% income tax withheld at source. Despite the tax, JCP can be advantageous in tax terms for the company.
• Bonuses: An increase in the number of shares held by an investor, given free of charge by the company as a way of rewarding shareholders.
• Subscription Rights: Right to purchase new shares issued by the company at a reduced price, allowing you to increase your position in the company under favorable conditions.

These payments are an excellent opportunity to receive additional income without having to sell the shares, and are a way to ensure a constant cash flow in the long term.

How Do Dividends Work in Practice?

Each company has its own dividend distribution policy, which may vary in frequency and amounts.

Traditional companies with consistent profits, such as those in the banking sector, generally have a more stable distribution policy.

Growing companies, such as technology companies, may prefer to reinvest profits rather than distribute them.

When a company decides to distribute dividends, it sets specific dates:

1. Declaration Date: Day on which the company announces the amount and date of payment of dividends.
2. Ex-Dividend Date: After this date, anyone who buys the shares will not be entitled to the next payment.
3. Payment Date: Day on which the amount is actually deposited into the shareholder's account.

To receive dividends, the investor must hold the shares by the ex-dividend date.

After this date, whoever buys the share will no longer be entitled to the next payment, as it will remain with the previous owner.

How to Take Advantage of Profits to Increase Passive Income?

The best way to take advantage of your earnings is to reinvest them, especially if your goal is to build wealth in the long term.

Reinvesting profits increases the number of stocks in your portfolio, which can generate even more profits in the future.

This process is known as compound interest, where gains accumulate over time.

Additionally, it is essential to look for companies with a consistent dividend policy. Some strategies include:

• Invest in dividend paying companies: Companies with a solid history of dividend distribution are more predictable and offer greater security for investors seeking passive income.
• Diversify your portfolio: Distributing capital across different sectors helps reduce risk. Each sector has a specific behavior regarding dividends, which can ensure a more regular distribution over time.
• Use apps to monitor: There are applications that help you track payment dates, dividend history and company financial information, making it easier to manage your income.

Examples of Applications for Tracking Income

Tracking your earnings manually can be challenging, but several apps make this process easier.

Here are some helpful options, with links and reviews:

1. Kinvo
   • Description: Brazilian application that allows you to track investments from various brokerages and financial institutions. With it, you can check your earnings history and monitor your portfolio's performance in an integrated manner.
   • Assessment: 4.5/5
2. Trademap
   • Description: Provides real-time monitoring of stocks, FIIs and other assets. It displays detailed information about dividends and important dates, making life easier for investors seeking dividends.
   • Assessment: 4.3/5
3. Status Invest
   • Description: Tool focused on investment and income analysis, with historical data and detailed indicators. Status Invest is useful for understanding the performance of assets in terms of dividends.
   • Assessment: 4.6/5

Taking advantage of profits is an excellent strategy for those looking to build a passive income and obtain long-term gains.

With a good choice of companies, reinvestment and the use of apps to monitor payments, you can turn your investments into a sustainable source of income.

Conclusion

In conclusion, stock dividends have the potential to be a significant source of income on your long-term investments.

However, it is essential that your investment strategy is aligned with your personal financial goals and risk tolerance.

Therefore use recommended applications such as Kinvo to assist you throughout the process of controlling your share income.

The conscious incorporation of income can be the foundation for a more stable and profitable financial future.