Complete Guide: How to Generate Profit from Stock Dividends in 2023

Why Invest in Dividend-Paying Stocks?

Dividends represent one of the most direct ways to earn profits in the stock market. They are the portion of profits that companies distribute among their shareholders as a reward for holding their invested capital. In 2023, many of the world’s most important companies—ranging from tech giants like Apple, Microsoft, and Meta Platforms to major financial institutions like JP Morgan, Santander, and PayPal, or entertainment groups like Walt Disney and Netflix—maintain active dividend payout policies.

For investors, this means access to an additional return beyond stock appreciation. That’s why many people choose dividend stocks over other less profitable options.

Dividend Classification: The Three Types You Should Know

There are three fundamental categories based on their nature:

Ordinary Dividend: The expected and regular payment that the company makes according to its normal business projections. It represents the usual profit flow distributed to shareholders.

Complementary Dividend: Paid once results are confirmed, especially when they exceed initial expectations. It functions as an additional bonus.

Extraordinary Dividend: Generated from one-time income such as asset sales or business participations. Its frequency depends on the type of business.

Payment Modalities: Cash vs. Shares

Companies offer two main forms of payment:

Fixed Dividend: The Shareholders’ Meeting sets an exact monetary amount in advance. This modality is most common among large corporations.

Flexible Dividend: Allows shareholders to choose between receiving cash, new shares, or a combination of both. Banks and financial institutions frequently use this approach.

Cash payment remains the preferred option for most investors, who seek immediate liquid returns. If they opt for shares, the company first grants purchase rights that are traded on the market before execution.

The Four Key Dates That Determine Your Dividend Rights

Understanding these dates is critical to avoid missing opportunities:

Declaration Date: The Shareholders’ Meeting officially announces the dividend, specifying the amount, payment date, and record date.

Record Date: Last day to be a shareholder and entitled to receive the dividend. If you do not hold the shares by this date, you will be excluded.

Ex-Dividend Date: The decisive cutoff point. Those who held shares until this day will receive the payment, even if they sell afterward. Purchases made after this date will not receive anything.

Payment Date: When funds are transferred to those who met the requirements on the record date.

2023 Dividend Schedule: Major Stocks

*Estimated data

Factors That Can Affect Your Dividends

Deterioration of Business Results

When the company fails to meet projected revenue milestones, the dividend may be reduced or suspended. Although canceling dividends penalizes the stock severely, some companies offset the payment against reserves instead of operational results, offering a temporary but not permanent solution.

Unexpected Financial Risks

Major lawsuits, liquidity crises, or other stress events can lead to temporary suspension of dividends until the situation normalizes.

Regulatory Restrictions

Governments may prohibit dividend distributions in publicly rescued companies, as happened in the European Union during the COVID-19 crisis.

Extraordinary Profits

Surplus earnings or asset sales generate additional extraordinary dividends beyond regular ones.

Changes in Corporate Control

In cases of acquisition (OPA), new controls may suspend dividends for financial stability reasons.

Practical Calculation: Formulas to Measure Profitability

Dividend per Share (DPA)

DPA = Net Available Profit / Number of Shares Outstanding

Dividend Yield (RD)

RD (%) = (DPA / Current Share Price) × 100

Illustrative Example

Suppose Banco Financiero generates profits of 10 million euros and allocates 80% (8 million) to dividend payments. With 340 million shares outstanding:

DPA = 8,000,000 / 340,000,000 = 0.0235 €

If the current price is 1.50 €:

RD = (0.0235 / 1.50) × 100 = 1.56%

Tax Burden: How Much the Tax Authorities Take

In the Spanish tax model, cash dividends are taxed with a progressive scale:

• Up to €6,000: 19%
• From €6,001 to €50,000: 21%
• From €50,001 to €200,000: 23%
• Over €200,000: 26%

If you receive dividends in the form of shares, taxation applies at the time of sale, using the weighted average of your old and new holdings as the initial purchase price.

Final Strategy: Portfolio Composition with Dividends

Selecting dividend-paying stocks in 2023 should consider: (1) company results stability, (2) consistent payment history, (3) expected yield versus current price, and (4) tax impact according to your personal situation. Diversifying across sectors—technology, finance, consumer—reduces risk while maintaining regular income flows from dividends.