What is a dividend?
A dividend is a payment made by a corporation to its shareholders. This payment comes out of the company’s earnings. Dividends are usually paid at regular intervals, such as quarterly or annually.
You should pay attention to dividends when you are considering buying shares in a company. If a company has been consistently increasing its dividend payout, then it is likely to continue doing so in the future.
- a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).
Merriam Webster Online
1: an individual share of something distributed: such as
a: a share in a pro rata distribution (as of profits) to stockholders
“Profits are distributed to shareholders as dividends.”
b: a share of surplus allocated to a policyholder in a participating insurance policy
2a: a resultant return or reward
“our efforts are finally paying dividends”
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets.
Different types of dividends
Regular dividend payouts are the most common type of dividend payout. Companies typically pay these dividends every quarter or year.
Another type of dividend payout is called special dividends. This type of dividend payout is usually announced at the end of a fiscal year. Special dividends are typically paid out after regular dividends.