Dividends and buybacks

The two main ways companies return money to their shareholders.

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When a company makes more money than it needs to run and grow the business, it can keep the cash, pay down debt, buy other companies or return money to its owners. There are two main ways to return it.

Dividends

A dividend is a cash payment for each share, often made every quarter in the U.S. To receive it, you need to own the share before the ex-dividend date. On that date, the share price usually drops by about the amount of the dividend, because that cash is leaving the company. The dividend yield compares a year of dividends with the share price.

Buybacks

In a buyback, the company buys its own shares on the market. With fewer shares left, each one represents a slightly bigger piece of the company, and earnings per share can rise even if total profit doesn't. Apple has spent hundreds of billions of dollars on buybacks since 2012.

Companies that do neither

Many companies return little or nothing and reinvest what they earn, often because they still see room to grow. For years, Alphabet and Meta paid no dividends and returned money only through buybacks; both paid their first dividend in 2024. Paying dividends isn't a sign of quality, and not paying them isn't a warning sign: they reflect different stages and choices.