Question 1

What is a dividend yield?

Accepted Answer

Dividend yield = annual dividend per share / stock price × 100. A stock paying $3/year trading at $60 has a 5% yield. Yield changes as the stock price moves.

Question 2

What is DRIP investing?

Accepted Answer

DRIP (Dividend Reinvestment Plan) automatically reinvests dividends to buy more shares. Over time, this creates compounding growth — you earn dividends on dividends, which can dramatically accelerate portfolio growth over 10-20+ years.

Question 3

What is a good dividend yield?

Accepted Answer

A yield of 2–6% is generally considered healthy. Below 1% offers little income. Above 8% may signal financial trouble. Dividend Aristocrats (25+ years of increases) typically yield 2–5%.

Question 4

Are dividends taxed?

Accepted Answer

Qualified dividends in the US are taxed at 0%, 15%, or 20% depending on income. Ordinary dividends are taxed as ordinary income. In a Roth IRA or 401(k), dividends grow tax-free.

Question 5

How large a portfolio do I need for $5,000/month in dividends?

Accepted Answer

At a 4% dividend yield, you need a $1.5 million portfolio for $5,000/month ($60,000/year). At 5% yield you need $1.2M; at 6% yield you need $1.0M.

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