Okay you need to stop taking investment advice from 20-something year old youtubers who recently discovered the existance of dividends and think they are some magic way of generating "passive income" a phrase that is constantly misused.

I will do my best to explain what dividends actually are.

So as you likely understand when you buy stock you are buying shares of a company and when you buy shares in a fund that fund manager is distributing that among stock buys in companies or other assets.

As companies make profits they have a choice about what to do with that profit. They can reinvest it in themselves to grow the company...buy more equipment, hire more people etc...or they could distribute that profit to their shareholders (a distribution). The value of the company translates directly to its share value. If a company decides to invest all of its profits into itself then all of the profits are included in the share value. If the company decides to distribute them to share holders in the form of a dividend then those profits are NOT included in the share value and therefore the share value does not increase.

People seem to think dividends are on top of growth, they are not...growth and dividends are just two ways of handling total return.

Small companies tend to be growth focused, they tend to put all their monry into themselves and rarely issue a dividend. They have the highest chance og return (picture investing in Microsoft when it was a startup) but also the highest risk. Huge companies that have been around a long time tend to have lrss they can do to grow so they are more likely to issue dividends (think like AT&T) because if they reinvest all of their profits into thrmselves it wont lead to that much growth and thus it could be seen by shareholders as wasteful. These companies also tend to be fairly low risk (as an aggregate, puttimg all your money in 1 company would still be risky).

Dividend funds tend to just have their holdings be these companies that issue their profits as dividends to shareholders. There are also funds like QYLD that artificially generate dividends with covered calls but not going to get into that.

So what does this mean. If AT&T srock price is $100 anf it sees 10% return in its value and issues a 5% dividend what that would mean is that effectively its return would make the stock price $110 if all of that was growth but with the 5% dividend the stock price ends up being $105 and the shareholders get a check for that 5% in the form of a distribution...a dividend. If you own shares of AT&T outside of a tax-sheltered account like a 401k then that dividend is considered to be income and is taxed accordingly. Thats not a good thing. If instead your investment was in a company that also saw 10% return but did not issue a dividend you would still have made the same return but it would all be realized in the share value and not taxed. This is why seeking out dividends for "passive income" as a way of making money does not make sense.

Compabies that issue dividends tend to tey to keep theie dividend "yield" steady, so yhat investors who want that income stream can rely on it. What that means though is they will issue a dividend even if the share value goes doen which will just drive the share value down even further. If AT&T share value was $100 and in the year they saw a negative 10% return their stock woukd be $90 a share...but they would also still issue a 5% dividend which would mean it would drop even further to $85 a share.

This is the issue. Yes you csn find funds that regulaely distribute a 6% dividend yield...but you have to understand that value is coming from the value of the funds holdings. Its basically like withdrawing money from your bank every month for some extra cash. Is that income?

So what are dividends good for? Well they are just a part of a companies overall return and a lot of solid performing large bluechip type companies issue dividends ad part of their value to shareholders...and thats fine.

But they arent something to try to maximize or seek out. If you are a multimillionaire it might make sense to invest more heavily in a broad base of relatively solid companies that ossue dividends and use those dividends as a source of income at the cost if having less growth (but also less risk) But as an invester who is just starting choosing dividend yielding funds and compabies exclusively is a terrible strategy that will majoy hamstring the growth potential of your investmebts especially if your holdings are not tax sheltered.