When you invest, that decision and the patience to stick with it will begin to pay dividends – and not just figuratively! You will literally be paid something called “dividends” or “distributions” (we will use dividends for both) from the ETFs in your portfolio; so what are dividends? And how do they fit in with Raiz?

A dividend is a portion of a company’s earnings that is returned to shareholders. Companies use dividends to pass on their profits directly to their shareholders.

A company will pay a small percentage of its profits to the owner of each share of stock.

Example:
You own 1000 shares of fictional company Mighty Oaks. Mighty Oaks pay a dividend of 5c per Share.

You will receive $50 (Number of Shares Owned X Dividend per Share) in dividend income.

Dividends and ETFs
As an Raiz investor, you’ll have a portfolio of ETFs, so that raises a few more questions…

Do ETFs pay dividends?
Yes! In short – and in fact, for the most part, dividends in ETFs are relatively straightforward. As discussed in our “What is an ETF” blog, ETFs are essentially a combination of shares or bonds bundled together. To put it simply, ETFs basically just take all the dividends from the bundle of shares, and pay all those dividends out to ETF unitholders. 

So, as an ETF shareholder, you benefit from the dividends of all the companies which are contained in your ETF.

What will Raiz do with my dividends?
With Raiz, your dividends and distributions will be automatically reinvested in your portfolio. You can view your dividends and distribution history through the platform, and we will aim to provide information on when the ETFs in your portfolio will pay their dividends.

Why reinvest?
To answer this it might be useful to understand why some companies don’t pay dividends. One reason for this, is growth. Whilst it may make shareholders happy to receive a dividend, it may make them even happier if the company keeps their profits and invests them to grow the business – which will in turn, can increase the value of the stock.

We hope that by reinvesting your dividends back into your Raiz portfolio we are investing in the growth potential of your portfolio.  Another step in the right direction, helping your spare change grow.

Now you know about dividends, let’s hope that you can start benefiting from them soon, with Raiz. Sign up today at https://www.Raizinvest.com.au