Dividends 101: Get Paid to Own Stocks

Let us be honest for a second. Living in Nairobi is an extreme sport. Between the rent prices, transport costs, and that one friend who always forgets their wallet when the bill arrives at the club, your bank account goes through a lot of ‘character development.’

We are all chasing the same dream: The Soft Life.

We want to make money without waking up at 5:00 a.m. to beat traffic on Thika Road. We want money that hits our M-Pesa while we are sleeping, chilling on Netflix, or stuck in a tedious Zoom meeting.

Well, good news. That isn’t magic. It is not a pyramid scheme. And it is definitely not Wash Wash. It’s called Dividends.

So, What Exactly is a Dividend?

Imagine you and your three best friends decide to buy a matatu. You all contribute money to buy a sleek Nganya (let’s call it ‘The Panda Express’). You hire a driver and a conductor.

Now, here is the sweet part: You do not drive the matatu. You don’t shout “Tao! Tao! 50 Bob!” at the stage. You don’t deal with the mechanic. You are just the owner.

Every evening, after the driver has paid for fuel and the conductor has taken their cut, there is profit left over. Since you own a piece of the Matatu, a share of that profit is directly sent to your phone.

That money? That is a dividend.

In the stock market, it works the same way. When you buy a share of a company like Coca-Cola, Microsoft, or Apple on PandaPanda, you are technically a part-owner of that business. When that business makes a massive profit selling sodas or iPhones to the world, they decide to share a slice of that profit with their owners.

Since you are an owner, they send you money. Cash. Cold, hard dollars. Just for existing.

The ‘Chicken vs. The Egg’ Situation

To understand why dividends are a cheat code for wealth, we need to talk about poultry… (stay with me)

There are two ways to make money with stocks:

The Capital Gains Way (Selling the chicken) - You buy a chicken for 500 Bob. You feed it. It gets fat. You sell it for 800 Bob. You made a 300 Bob profit, but now, you have no chicken. To make money again, you have to go find another chicken.

The Dividend Way (Selling the eggs) - You buy the chicken. You keep the chicken. The chicken lays eggs every week. You sell the eggs (or eat them). You make money, but guess what? You still own the chicken.

Dividends are the eggs. You get paid cash regularly (usually every three months in the US market), but you keep your shares. If the share price goes up? Great! Your chicken is now worth more, and it is still giving you eggs.

Why Would a Company Just Give You Money?

You might be thinking, ‘Ah, hakuna cha bure. What’s the catch?’

There is no catch.

Huge American companies make billions of dollars. Sometimes, they make so much money that they don’t even know how to spend it all on new factories or fancy ads. So, to keep their investors happy (that is you), they distribute the extra cash. It is their way of saying, ‘Thanks for trusting us with your money. Here is your share of the loot.’

Some companies are so consistent with this that they have paid dividends every single year for over 50 years. They pay through recessions, pandemics, and wars. In the finance world, we call them Dividend Kings. It’s like having a tenant who never ever misses rent.

How Much Can You Actually Make?

Okay, let’s manage expectations. If you invest 1,000 bob, you are not going to buy a Porsche tomorrow.

Dividends are measured in something called a Yield. Think of Yield like the returns on a rental plot. If you build a bedsitter for 1 Million shillings, and it pays you 10,000 shillings a month, that’s your yield.

In the US stock market, companies usually pay between 1% to 5% of the share price back to you in dividends every year. It starts small. Maybe enough to buy lunch. Then enough to pay the internet bill. Then enough to pay rent. And so on.

But here is the ‘magic trick’ (compound interest): Don’t eat the eggs.

If you take that dividend money and use it to buy more shares (more chickens), then the next time, you get even more dividends. Then you buy even more shares. Eventually, the snowball gets so big that it starts rolling by itself.

You don’t need to be a billionaire to start. You don’t need a degree in Economics. You just need to stop letting your money sleep in your bank account, losing value, and put it to work on PandaPanda.

Start collecting your rent today. No tenants required.