We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. Learn more.

  1. Investing
  2. Dividends

The Difference Between Dividends and Interest

By:
Taylor Tepper
2 min read

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.

Tags