The Difference Between Dividends and Interest
- Most Stock Pickers Stink. Here's a Smarter Way to Invest
- This Chart Shows the Biggest Stock-Market Losers Under Trump. You Should Buy Them Anyway
- 8 Things to Know about the Bull Market on Its 8th Birthday
- Goldman Sachs Stock Is Soaring. Is Now the Time to Buy?
- What Are the Nasdaq, Dow, and S&P 500?
Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
Interest and dividends sound sort of like they should mean the same thing. But they don’t—and it’s important that you understand the difference.
Interest is what you earn on your money by lending it: to a company through a bond, for example, or to a bank when you buy a CD. It’s income that's promised to you by contract, which assures that as long as you park your money for a certain amount of time, you'll be paid a percentage. You can count on the income.
Dividends, on the other hand, are a share of profits that you get as a part owner of a company when you purchase its stock. They are your portion of the company's earnings—if, in fact, it's making money. You have no contract, you’re not guaranteed anything as a shareholder, and there is no expectation that the amount will stay steady or even continue being paid.