Question 1

What is a DRIP?

Accepted Answer

A Dividend Reinvestment Plan (DRIP) automatically reinvests your dividends into additional shares. This compounds your returns over time as you earn dividends on an ever-growing number of shares.

Question 2

What is a good dividend yield?

Accepted Answer

A healthy dividend yield typically ranges from 2-6%. Yields above 6% may indicate risk or an unsustainable payout. The S&P 500 average yield is around 1.5%. Dividend Aristocrats average about 2.5%.

Question 3

How are dividends taxed?

Accepted Answer

Qualified dividends (held 60+ days) are taxed at long-term capital gains rates: 0%, 15%, or 20%. Ordinary dividends are taxed as regular income. Dividends in retirement accounts like IRAs are tax-deferred.

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