Stocks
Are stock dividends halal?
Read our methodology and editorial policy.
Summary
Dividends from a shariah-screened company are permissible. The portion of dividend income attributable to the company's incidental interest earnings must be purified by donating it to charity without expectation of reward.
The reasoning
Companies that pass the standard 5% non-halal income screen still earn small amounts of interest on their cash balances. AAOIFI requires shareholders to estimate the impermissible portion of dividends received and donate it.
The DJIM and AAOIFI methodologies publish purification percentages annually. For most screened large-cap companies, this is 1–4% of dividends received.
Scholar citations
"Permissible with annual purification"
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