Living off dividends? Here's what you need to know.

The question everyone is asking: should I receive dividends in cash or in shares? Spoiler: it depends on your investor profile.

The basics (no academic jargon)

Profitable companies return profits to shareholders in two ways:

• Cash dividends: You receive direct cash, but you pay taxes and the stock price falls by the same amount.
• Dividends in shares: More new shares, deferred taxes, and you decide whether to sell them or reinvest.

The plot twist: Can I live solely off dividends?

Short answer: yes, but you need a lot of initial money. Example: with a 5% annual return, you would need to invest 600,000 euros to earn 30,000 euros gross annually. Most people do not have that capital.

The 5 dates you must memorize

1. Declaration Date → Board announces the dividend
2. Ex-dividend date → Last chance to buy and collect (the most important)
3. Registration date → The company verifies who the eligible shareholders are
4. Payment Date → The cash arrives ( or new shares )
5. Taxes → Vary by your country, taxed just like cash

Pro tip: Buy 3 days before the ex-dividend date for the transaction to settle.

Real advantages vs smoke

✅ Advantages:

• Compound interest effect if you reinvest
• Protect your capital if the stock falls ( a 4% dividend offsets a 5% drop )
• Mature companies tend to increase dividends over the years
• Less volatility than the general market

❌ Disadvantages:

• Companies can change policies whenever they want
• Very high dividends may indicate financial problems
• Slow growth vs companies that reinvest (tech)
• Taxation can change at any time

Why do some companies NOT pay dividends?

Companies like Amazon, Tesla, Meta, and Google prefer to reinvest in R&D, expansion, or stock buybacks. Their logic: the stock price grows more than any dividend. It works, which is why they don’t pay.

How to start (without drama)

1. Define what you are looking for: to complement your pension or to grow in the long term?
2. Calculate how much to invest, the risk you can tolerate, expected return
3. Analyze financial health of companies on their website ( ex-dividend dates, balance )
4. Choose your instrument: direct stocks, (ETF) funds, or CFDs
5. Learn about taxes in your country

The “dividend aristocrats” (the elite)

There are 66 stocks in the S&P 500 that have 25+ years of consecutive dividend increases. Coca-Cola is the queen with over 100 years of dividends. Warren Buffett is a fan.

You can buy directly or get into an ETF (ProShares S&P 500 Dividend Aristocrats) that tracks these.

The DRIP factor (bonus round)

Some companies offer to automatically reinvest dividends in new shares without commissions. Some even sell shares at a 1-10% discount. If you don't need cash right now, it's quite useful.

Bottom line

Dividends = a sign that the company is doing well and trusts in its future. It is a solid strategy for recurring income, but it is not a panacea. Those that pay dividends are mature companies ( low volatility, slow growth ). If you want price explosion, look for tech without dividends. If you want stable profitability, here is your play.