How do dividends work on Robinhood

2020 Investing Guide to Robinhood Dividends

This year has led to a ton of new investors who are using the Robinhood App to buy dividend stocks. We found some great information provided by Robinhood about how to invest in stocks that provide dividends.

Dividends

How do dividends work on RobinhoodWe process your dividends automatically. Cash dividends will be credited as cash to your account by default. If you have Dividend Reinvestment enabled, you can choose to automatically reinvest the cash from dividend payments back into individual stocks or ETFs.

You can view your received and scheduled dividends in your mobile app:

  1. Tap the Account icon in the bottom right corner.
  2. Tap Statements & History.
  3. Tap Show More.
  4. Tap Dividends on the top of the screen.

You might be asking yourself, “how do dividends work on robinhood“. If you have dividends that are scheduled but haven’t been paid yet, they’ll appear in the “Pending” category. You’ll find the scheduled date and amount listed next to the stock’s symbol. Recently-paid dividends are listed just below pending dividends, and you can click or tap on any listed dividend for more information.

In order to qualify for a company’s dividend payment, you must have purchased shares of the company’s stock until the ex-dividend date and hold them through the ex-dividend date. Keep in mind, you can sell these shares on the ex-dividend date or later and still qualify for the payment.

You will not qualify for the dividend if you buy shares on the ex-dividend date or later, or if you sell your shares before the ex-dividend date.

Dividends that are paid in foreign currency will not display as pending, and only appear in History after your account has been credited. Keep in mind, dividends for foreign stocks take additional time to process. You’ll most likely receive your dividend payment 2-3 business days after the official payment date.

Dividends will be paid at the end of the trading day on the designated payment date. Fractional shares dividend payments will be split based on the fraction of shares owned, then rounded to the nearest penny.

If you don’t see a dividend, or if you have questions regarding the amount, please let us know.

Reversed Dividends

Sometimes we may have to reverse a dividend after you have received payment. If this situation occurs, you will see the reversed dividend in the Dividends section of the app. You can click or tap on any reversed dividend for more information.

We describe some of the most common dividend reversal scenarios below.

Rate Update

If the rate was updated after payment was made to users, we will reverse the inaccurate dividend and repay using the correct rate. The correct dividend and payment will show up in the app as paid. These rate changes are determined by the issuer, not by Robinhood. Common reasons include:

  • The company amends the foreign tax rate.
  • The company amends foreign currency to USD/ FX rate.
  • The company amends the dividend rate(s).
  • The company amends one of the following critical dates: ex-date, record date, or payment date.

Complete Reversal

In another scenario, we may pay out a dividend that gets recalled and we need to reverse the dividend completely. The dividends may be recalled by the DTCC or by the issuing company. If this situation occurs, you will see the reversed dividend in the Dividends section of the app, as well as on your monthly account statement.

Dividend Reinvestment (DRIP)

With Dividend Reinvestment, you can automatically reinvest cash dividend payments back into the underlying stock or ETF.

What Is a Drip?

The word “DRIP” is an acronym for dividend reinvestment plan, but DRIP also happens to describe the way the plan works. With DRIPs, the cash dividends that an investor receives from a company are reinvested to purchase more stock, making the investment in the company grow little by little. – According to Investopedia.com

KEY TAKEAWAYS

  • A DRIP is a dividend reinvestment plan whereby cash dividends are reinvested to purchase more stock in the company.
  • DRIPs use a technique called dollar-cost averaging intended to average out the price at which you buy stock as it moves up or down.
  • DRIPs help investors accumulate additional shares at a lower cost since there are no commissions or brokerage fees.