You won't pay on losses. Your stock just won't be worth as much. You will get a form at tax-time to file income tax for the dividends, which will count as earned income, on which you'll pay taxes each year. If you cash out the stock and it's worth more than it was when you got it (this is call cost basis), you will pay capital gains taxes on the increased value. If it's worth less than its cost basis when you cash it in, this will be a capital loss and this will be a deduction on your income taxes. HTH!