What is Dividend Dividend? Full Analysis of Cash Dividends, Stock Dividends

A “deposit dividend” is a passive income method that many people aspire to.

Buy shares of some good companies and do nothing every year and receive dividends from the company — sounds great, but what exactly is the dividend? Why should a company issue a dividend? Is dividend yield really steady and unprofitable?

THIS ARTICLE WILL TELL YOU THE COMPLETE LOGIC OF DIVIDENDS IN THE SIMPLEST WAY, AND YOU WILL KNOW BY THE END: DIVIDEND INVESTING IS NOT RIGHT FOR YOU, HOW TO START, WHAT PITFALLS TO WATCH OUT FOR.

1. What is a dividend dividend? Company Dividends to Shareholders

Dividend (Dividend) That is, the company distributes the money it earns and distributes it to the shareholders. You hold the shares, you are the shareholders of the company and have the right to share in the profits of the company.

Explained in white

Imagine that you and 9 friends jointly opened a drink shop and invested $10 million per person for a total of $100 million. I made 50 million a year later, subtract the 20 thousand that you want to leave to expand the store, and the remaining 30 thousand can be distributed to everyone.

This 30 thousand is a “dividend”, and you hold 10% of the shares, which can be divided into 3 thousand dollars.

The logic for a company to issue dividends is the same:

• The company made 100 billion this year
• Deduct $60 billion to keep your investment
• Remaining 40 million points to all shareholders
• You hold 1,000 shares, proportionally divided into what you deserve

💡 Core Concepts: Dividends are not “additional money earned”, but “distribution of company profits”. The company makes money, and shareholders only have dividends to earn.

Second, two forms of dividends: cash dividends vs stock dividends

There are two ways for a company to issue dividends:

① Cash Dividend

The company transfers cash directly to your securities account.

Example:

• TSMC ANNOUNCES CASH DIVIDEND OF $3 PER SHARE
• You hold 1,000 shares.
• You will receive $3,000 in cash (before tax deduction)

Advantages:

• Get cash and use it freely
• Suitable for retirees who need cash flow

Disadvantages:

• Taxes to be paid (2nd generation health supplement premium 2.11%)
• If you don't need cash, you're wondering how else to invest

② Stock Dividend

The company does not find cash, but gives you more shares.

Example:

• Honghai Announces Issuance of Equity Dividends of $0.5 per Share ($10)
• Each holder of 20 shares can receive 1 share
• You hold 1,000 shares and you get another 50 shares

Advantages:

• No 2nd Generation Health Insurance Supplement
• The number of shares increased and more dividends in the future

Disadvantages:

• No cash received, cannot be spent directly
• Share capital inflation, the value per share may be diluted

Which one is better?

If you need cash flow → Companies with high cash dividends
If you want to accumulate in the long term → STOCK DIVIDENDS OR CASH DIVIDENDS ARE POSSIBLE

Most listed companies in Taiwan are “cash dividend based and stock dividend backed”, while US companies find almost only cash dividends.

3. How to calculate dividends? Three key dates

Dividend distribution has a fixed process, and it is important to understand these three dates:

① Ex-Dividend Date

You have the right to buy a stock before that day; buy it after that day and you will not receive the dividend this time.

Key points: The share price falls on the day of the dividend, and the decrease is approximately equal to the amount of the dividend.

Example:

• TSMC Shares Price $600, Declares Cash Dividend of $3
• The opening price on the day of the interest rate will become 597 yuan (600 - 3)
• This is called a “spread”, not a fall in the share price, it is just a reflection of the dividend on the price

② Payment Date

The company actually transfers the money to your account on the date it is usually 1-2 months after the interest break date.

③ Fill

After the interest is subtracted, if the share price rises again to the previous price, it is called a “fill”.

Example:

• SHARE PRICE BEFORE DIVIDEND 600
• Change after interest rate loss 597 yuan
• After that, it increased back to $600 → Filling successful

What does the filling stand for?

• You get a $3 dividend.
• Stock Price Rises Again, Stock Value Has Not Changed
• Equals to “Really Earn $3”

What if you don't fill it out?

• You get a $3 dividend.
• But the share price has remained at $597
• Actually you don't earn anything (left hand changes right hand)

⚠️ What beginners often misunderstand: Receiving dividends does not equate to earning money, the point is “Can I fill it out”.

4. Are dividends subject to tax? Three Taxes to Know

Dividends are not fully collected and are subject to tax deduction:

Tax 1:2nd generation health supplement premium (2.11%)

Cash dividends received in a single cash dividend of more than $2,000 are subject to a 2.11% top-up premium.

Example:

• You received a cash dividend of $5000
• Additional premium of $1,055 will be deducted (50,000 × 2.11%)
• Actual entry $48,945

TAX 2: INCOME TAX (INCORPORATION OF COMPREHENSIVE INCOME TAX)

Dividends are included in the annual income statement, subject to your income tax rate (5% ~ 40%).

There are two tax methods to choose from:

1. Consolidated Taxation: Dividend income, offset by 8.5% (up to 8,000)
2. Separate Taxation: Dividends are taxed at 28% separately

HIGH EARNERS OFTEN CHOOSE SEPARATE TAX COMPARISONS.

Tax 3: Overseas Income Tax (Investing in US Stocks)

If you invest in US stocks with dividends, the US will deduct a 30% withholding tax first, and then return to Taiwan to declare overseas earnings.

💡 Key points: Dividends are taxable, not how much you earn.

5. Depositary dividend: who is suitable for?

“Deposit Bonds Dividend” sounds great, but it's not for everyone:

Suitable for people who hold dividends

① Retired or nearing retirement

• Need stable cash flow to pay living expenses
• Don't want to take on too big a fluctuation
• Not much time, do not want to operate frequently

② Those who have a stable income and are not in a hurry to spend money

• STABLE SALARY, NO NEED TO LIVE ON DIVIDENDS
• Want to accumulate passive income for future retirement
• Can hold for a long time without fear of short-term fluctuations

③ Conservative investor

• Seek steady payoff, not violence
• Emphasis on “Can I sleep?”
• Willing to exchange time for steady growth

People who are not suitable for depositing dividends

① Young people who want to quickly accumulate wealth

• Dividend return is usually only 3~ 6%
• Too slow for young people, unable to accumulate principal quickly
• Priority should be given to investing in high-growth assets

② People with too little capital

• 100 million shares, 5% dividend per annum = $5,000
• About 40,000 after tax withholding, more than $3,000 per month
• The capital is not big enough, the dividend does not feel anything

③ Those who seek high pay and can withstand fluctuations

• Dividends are generally low growth
• If you want high returns, you should invest in growth stocks or other assets

6. Three common mistakes in stocks

Misconception 1: The higher the dividend, the better?

Wrong! High dividends can be a trap.

Some companies have a dividend yield of up to 8～ 10%, but this may be due to:

• Share price falls, higher interest rates calculated by low stock prices
• Companies make all the money they make and invest no money in the future
• Unstable earnings, higher dividend this year and may not be available next year

The right thing to do: See if the company can “stabilize the dividend” instead of the “one-time high yield”.

Misconception 2: Earning dividends means making money?

Wrong! The share price will fall after the interest is divided, and taking a dividend does not equate to making money.

Conditions for really making money:

• Share price to fill (price before interest withdrawal)
• The Company Continues to Grow, the Stock Price Increases Over the Long Term

Misconception 3: You don't need a stock, so let it go?

Wrong! Companies can change and cannot survive without a brain for a lifetime.

To check regularly:

• Is there a recession in profitability
• Has the industry been eliminated
• Has there been a decrease in the dividend distribution rate

⚠️ Case in point: Many people save China Telecom and China Steel, as a result of which the company's growth has stagnated, the share price has not risen for decades, and the dividend yield has not kept up.

Seven, Dividends vs Cryptocurrency Staking: A New Type of Passive Income

The traditional passive income is “lead dividends”, but in recent years a new option has emerged:Cryptocurrency Staking (Staking)。

The two concepts are similar, but they work differently:

Features of cryptocurrency staking

① Higher rate of return

• Ethereum deposit maturity is around 3~ 5%
• Some DeFi protocols can hold up to 10~ 20%
• Far higher than traditional dividends

② Extremely low threshold

• Don't buy a stock with millions of dollars
• 100 yuan to start wagering
• Suitable for small business owners to accumulate passive income

③ Available daily

• No need to wait a year to collect once
• You can see your earnings increase every day
• The effect of multiplexing is more pronounced

④ But the risk is also higher

• Currency Fluctuations May Make Interest Odds Spreads
• Some protocols have security risks
• It takes time to understand how it works

💡 For young investors: If you want to experience the feeling of “passive income,” cryptocurrency staking may be better suited than stocks — low thresholds, high payouts, and fast learning outcomes.

8. Summary: The truth of dividend investment

Dividends are not free money, but “distribution of company profits”. Receiving dividends does not count as making money in itself, the main thing is:

① Can the company continue to make a profit and a stable dividend
Choosing the wrong company, the dividend will be less and less

② Share price can not be filled, long-term growth
If you don't fill it out, you change your left hand to your right hand. You don't earn anything.

③ What are your investment goals
Pursuing cash flow? Or pursuing asset growth?

Dividend investing is suitable for:

• Retired or nearing retirement
• People who need stable cash flow
• CONSERVATIVE AND ROBUST INVESTORS

Dividend investment is not suitable for:

• Young people who want to quickly accumulate wealth
• People with too little capital (effects below 100 million are not noticeable)
• Those who seek high pay and can withstand fluctuations

If you're the latter and spend time researching “which stocks yield high” rather than learning to invest in growth stocks, index investing, or cryptocurrency investments, the rewards will be better.

There is no standard answer to investing, and the key is to choose a way that suits your age and goals.

Disclaimer: This article is for educational and informational purposes only and does not constitute any investment advice. Both stock investments and cryptocurrency investments involve risk, and investors may lose principal. Please make a careful assessment based on your personal financial situation and consult a professional financial advisor if necessary.

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