What Types of Dividends are you Getting?

There are many types of dividends.  Having a list of the types of dividends out their can help review different qualities of a company.  Below is the list I use when looking at dividend types.

Types of Dividends

Company Types

Corporation – This is most dividend companies.  Think of 3M (MMM) and Disney (DIS).

REIT (Real Estate Investment Trust) – REIT invest in real-estate in many areas.  Some focus on commercial building, industrial buildings, hotels, data centers, and many others.  They are required to pay out 90% of their earnings as dividends so they do not get taxed.  Realty Income (O) is a popular REIT.


BDC (Business Development Corporation) – A BDC invest in smaller and mid-size companies by providing loans to companies that may not qualify at a bank.  They can use a variety of loan types, such as subordinated loans, private equity, and venture debt.  Like a REIT, they must pay out 90% of their profits in dividends.  Main Street Capital (MAIN) is an example of a BDC.

MLP (Master Limited Partnership) and LP (Limited Partnership) – Most MLP and LP are in the energy sector, like oil.  MLP have pass through income.  Instead of them paying taxes, there profit and losses are sent to the tax returns of their investors.  This avoids double taxation.  However, MLP and LP send out K1 tax documents and these have special tax results that you need to consider.  An example of a LP is Plains All American Pipeline LP (PAA).  You can tell when a company is an MLP or LP, because they often have that in their company name.

Pay frequency

Companies choice to pay their dividends in different frequencies.  Knowing how often you will get paid is good information to have.

Yearly – Some companies only pay a dividend once per year.

Biannually – Some companies pay a dividend only twice a year.  Disney (DIS) is an example.  They have only been paying a dividend twice a year for the last couple of years.

Quarterly – Most companies pay their dividends on a quarterly basis, such as 3M (MMM).

Monthly – There are not many companies that pay out monthly dividends.  Some investors like monthly dividends because their electric bill comes monthly, they should get their dividends monthly also.  Realty Income (O) is a great example of a monthly dividend payer.

Dividend Status

One of the important types of dividends for dividend investors is a company on this list.  Getting on this list takes some work and a commitment to dividends.

The track record is set by having:

  • An Increasing Dividend every Year
  • Without Missing a Payment
  • Not having a Dividend Cut
  • Over X Number of Years

Dividend Emperor – A stock that has been paying an increasing dividend rate for over 100 years.  I do not have an example of this, because I do not know of any.

Dividend King – A Dividend King is a company that has been paying an increasing dividend for 50 or more years.  This is a very select group of stocks.  3M (MMM) has been paying an increasing dividend for 58 years.

Dividend Champion – A Dividend Champion is a company that has been paying an increasing dividend for 25 or more years.  A Lot of dividend investors look at this list, which also includes the above list.  AT&T (T) is a stock that paid an increasing dividend for 33 years.

Dividend Contender – Is a stock that has been paying an increasing amount between 10-24 years.  These stocks are working their way towards a longer streak, but have not made the Dividend Champion status yet.  Caterpillar (CAT) is on this list at 23 years.

Dividend Challenger – Are stocks that has been paying an increasing amount between 5-9 years.  As such, these are the companies just starting down the path and have a little bit of a track record.  Activision Blizzard (ATVI) has a 7-year track record.

Dividend Aristocrats – This one is a little bit of a duplicate.  It is the same as a Dividend Champion, except it also belongs in the S&P 500.  AT&T (T) still fits the bill for this group.

Dividend Streak

100 Year Century Club – These are stocks that have been paying a dividend for 100 years plus.  There may have been cuts along the way, or have kept their dividend flat for a number of years during the streak  However, they have been paying out some kind of dividend for 100 years.  This would include the Great Depression and other hardships along the way.  Coca-Cola (KO) has been paying a dividend since 1893, and they on this list.  They are also Dividend King List.

Other Rankings

The above rankings are not the only statuses I would classify a dividend stock  There is a lot of dividend stocks that do not fit in the group above.

Random – These stocks do not pay a consistent dividend.  They have decided, instead of trying to make a standard dividend payment, they use last quarter’s earnings when deciding their payment.  Cal-Maine (CALM) and Southern Copper (SCCO) pay a dividend based on recent earnings.

Flat – Some companies are paying a flat dividend or only raise it on a rarer basis than yearly.  Currently, Ford (F) has decided to leave it regular dividend flat and does not plan to raise it.

New – A brand new dividend payer.  The company does not really have a track record.  They just started.  Eventually, they will fall into one of the other groups.

Dividend Cut – A company that has recently cut their dividend.  Many dividend investors do not want to own a company that has had a recent dividend cut.  Kinder Morgan (KMI) cut their dividend in 2016.

Types of Dividends

Regular Dividend – This are the normal dividend payments that go out.

Supplemental Dividend – Looking at Ford (F) as an example, they pay out a quarterly dividend.  In addition, once a year, they pay out a supplemental dividend.  This is a once a year dividend for them where they payout extra earnings on top of their regular dividend.  Often, these are planned yearly.

Special Dividend – This is often viewed a as surprised dividend.  The company might not even pay a dividend, but they want to give a some of their money back to their shareholders.  This may also include shares of a spin off.

How Dividends are Paid

Cash Dividend – They pay out their dividend in cash.

Stock Dividend – They issue additional shares instead of cash.

Property Dividend – A company give out a dividend that is not cash or their stock.  They can give out property or shares of a subsidiary.

Where

Domestic – Dividends paid to you by the country you are located in.

Foreign – Dividends paid to you by a company in another country.  This will also have changes with the currency exchange rates.  Also, you maybe charge additional taxes for receiving this dividend.

Read more about our Dividend Resources here.

Discloser of 2/8/17:

  • F, LVS, O: We own shares.
  • ATVI, CALM, CAT, DIS, KMI, KO, MMM, PAA, SCCO, T: I do not own or plan to buy shares in the next week.

 

Did I miss any types of dividends?  Was this helpful for you?  Please feel free to share your thoughts below.

, , , , , , , , , , , ,

Post navigation

6 thoughts on “What Types of Dividends are you Getting?

  1. I am only new to the dividend game but most companies in Australia pay quarterly or half yearly. This isn’t a concern to me at the moment but in the future I would like a steady income from all months which will shape where I make my purchases. Thanks for sharing.

    1. Except for my monthly dividend payers, I try to not be concerned with when I get my dividends. Maybe when I start living off of them. For now, I will buy the best companies with the best yield, regardless of when I am paid.

  2. I sold all of my REITS and utilities back in the summer 2016. I couldn’t justify holding at the valuations when there were other opportunities.

    I’m screening form the Aristocrats currently.

Leave a Reply