A dividend is the distribution of some of a company's earnings to a class of its shareholders, according to the amount and type of shares these shareholders have. Dividends are primarily paid out on a quarterly basis, but in rare instances a company will pay its dividend on a monthly or yearly basis. Companies are not obligated to pay their dividend and if they run into financial pressures, they may cancel the dividend altogether.
When a company pays a dividend, its value is reduced by the amount paid. This occurs because the money is leaving the company balance sheet and being sent to shareholders. Therefore the company has less cash on its books than it did before the dividend was paid and its share price may reflect that. However, this value is being transferred to shareholders who are earning a return on the dividend. So while the value of the company may go down, total shareholder return is going up by the amount paid out in dividends.
It’s important to adjust a chart for its dividends to visualize the impact of those dividends. This is especially true for long-term shareholders. A dividend-adjusted chart shows the total return of the asset. Meaning it adds the dividends paid out back into the share price.
To enable adjustment for dividends, go ahead and click the adj button on the bottom panel of the chart. The chart will then adjust to reflect dividend payments. See the image below.
If you cannot locate the adj button at the bottom panel of your chart, it means that price adjustments for the asset you’re currently viewing are not available.