In recent years, fractional shares have become a popular way for investors to get started in the stock market with less capital. One of the key questions investors have when considering fractional shares is whether they pay dividends. The short answer is: Yes, fractional shares do pay dividends, just like full shares.
Let’s explore how dividends work with fractional shares, especially when using the Tiger Trade app from Tiger Brokers.
How Do Dividends Work with Fractional Shares?
A dividend is a payment made by a company to its shareholders, typically from its profits. The amount of the dividend is generally determined on a per-share basis. However, when you own fractional shares, you’re essentially owning a portion of a share. Despite the smaller amount, these fractional shares still entitle you to receive a proportional dividend payment.
For example, if you own 0.5 of a share of a company that pays a $1 dividend per share, you would receive $0.50 as your dividend. This payment is made directly to your Tiger Trade account in cash, which you can choose to withdraw, reinvest, or use for other purposes.
What Happens in the Case of Stock Dividends?
Stock dividends are a bit different from cash dividends. In the case of stock dividends, a company issues additional shares to its shareholders rather than paying cash. For example, if a company offers a 2-for-1 stock dividend, you would receive additional shares based on your existing holdings.
However, if you own fractional shares, you might not be able to receive a fractional portion of a share. In this case, instead of receiving an additional fractional share, Tiger Trade will typically provide you with the equivalent cash amount for the fractional portion of the stock dividend.
For instance, if the stock dividend would normally grant you 0.25 of an additional share, you’ll instead receive the equivalent cash value for that fraction of the share based on its market price.
Benefits of Dividends on Fractional Shares
Owning fractional shares through Tiger Trade provides all the benefits of owning full shares, including receiving dividends. This is particularly advantageous for smaller investors who might not have the capital to buy full shares of higher-priced stocks but still want to enjoy the benefits of dividend income.
Some benefits of receiving dividends on fractional shares include:
– Steady income stream: Dividends can provide you with a consistent cash flow, which is especially helpful for those looking to generate passive income from their investments.
– Reinvestment options: You can use dividend payments to buy more shares, including fractional shares, to grow your investment over time.
– Ownership flexibility: Even with fractional shares, you are still entitled to all the perks of stock ownership, such as dividends, without needing to commit large amounts of capital.
Conclusion
Fractional shares are a great way to enter the stock market, and the trading fractional stock App, Tiger Trade, ensures that you can receive dividends on these shares just as you would with full shares. Whether it’s cash dividends or stock dividends, Tiger Trade has systems in place to ensure that you can invest share, even if they are fractional.
