Learn the stock market › The stock market from zero › Lesson 5 of 9
How do you make money from stocks?
Ten years of Exxon Mobil
This is the return on one share bought on Nov 7, 2016, using the prices that actually traded.
| Exxon Mobil | Per share | Against the first price |
|---|---|---|
| Price Nov 7, 2016 | $85.43 | |
| Price Nov 6, 2026 | $165.87 | |
| Price rise | $80.44 | +94% |
| Dividends along the way | $35.60 | +42% |
| Price and dividends | $116.04 | +136% |
| With dividends reinvested | +199% |
Dividends made up 31% of the total. Taken as cash, the total is +136%. Used to buy more shares, it is +199%, because the new shares pay dividends too. This leaves out tax and fees.
The mix varies between companies. Some pay out a lot and grow slowly. Others pay nothing and put everything into growth. What a company has paid year by year is in the dividend calculator. What a dividend does to the price is in the lesson on the ex-dividend date.
The price: someone will pay more
You make money on the price only when you sell for more than you paid. Until then, a gain is only a number in your account. A price can rise because the company earns more, or because buyers will pay more for the same earnings.
The dividend: the company pays out
A dividend is an amount per share, often paid every quarter in the US. The board decides each time, so it can be raised, cut or dropped.
How you can lose
The same two sources can let you down. The price can be lower when you need the money, and companies can stop paying. How often the whole market has fallen, and for how long, is in the study of every crash since 1928. What the market has returned a year, and at worst, is in the study of the average return. You can try another start date yourself with the if-I-had-invested calculator.
Test yourself
A stock goes from $100 to $110 in a year and pays $5 in dividends. What is the return?
How has it gone since? How Exxon Mobil has moved.