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What are dividends and how do they work? 

Companies can decide whether they'd like to distribute some of their net profits of surplus to their shareholders. This is called a dividend. It is a regular payment to shareholders and can be issued in multiple ways such as cash, stocks or others. 

We do not recommend eToro for long-term investors focusing on collecting dividends from US stocks. This is because the previously mentioned tax: eToro deducts the 30% default US dividend tax, rather than the – usually lower – tax treaty rate deducted by most other brokers.

ETF or indices dividends

ETFs and indices also pay dividends if some or all of the securities within the ETF/index pay dividends. They are either paid in cash or in more exposure within the ETF.

CFD dividends

CFDs with stock as underlying pay dividends. In this case, the broker owns the shares, therefore payment comes from the broker itself. Sometimes - as in eToro's case - with extra tax.

eToro: further reading

Author of this article

Bence András Rózsa

Author of this article

Bence’s purpose is to help you to understand the logic behind financial services. In his master’s studies, he specialised in business economy and finance to be able to give you a clear picture of the brokerage world. Having reviewed multiple brokers and robo-advisor services, his goal will always be to guide you in the world of investing as it is.

Bence András Rózsa

Broker Analyst

Bence’s purpose is to help you to understand the logic behind financial services. In his master’s studies, he specialised in business economy and finance to be able to give you a clear picture of the brokerage world. Having reviewed multiple brokers and robo-advisor services, his goal will always be to guide you in the world of investing as it is.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology

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