Dividend

A Dividend is a distribution of a portion of a company's earnings, decided by the board of directors, paid to a class of its shareholders. It is typically paid in the form of cash, but can also be distributed as stock, property, or other assets. Dividends represent a return on investment, rewarding shareholders for their investment in the company. The amount of a Dividend is usually expressed as a dollar amount per share (e.g., $0.50 per share) or as a percentage of the stock's price (the Dividend yield). The declaration date, record date, and payment date are critical in determining which shareholders are eligible to receive the dividend. Dividend payments are a major source of income for some investors, particularly those seeking a passive income stream from their stock holdings, and it is not always guarenteed to be paid.

Dividend meaning with examples

• ABC Corp announced a quarterly Dividend of $0.75 per share. Investors who held ABC stock on the record date, two weeks before the payment date, would receive the dividend. This Dividend, paid out of company profits, incentivized investors, contributing to a positive sentiment surrounding the stock, and potentially further increasing shareholder confidence.
• Retirement plans often include dividend-paying stocks. The consistent Dividend income generated from these investments supplements other forms of income, helping retirees to maintain their lifestyle. This predictable flow of money, compared to the fluctuations of the market, provides stability and financial planning certainty.
• In a stock repurchase, a company buys back its own shares. This can be a strategy implemented instead of paying a dividend. The choice between a Dividend and a stock buyback depends on factors such as the company's financial health, tax implications, and strategy to increase the share price.
• Companies listed on the stock exchange usually have Dividend policies in place. The amount of a Dividend can vary depending on economic circumstances and the company's financial performance. Companies generally strive to maintain or increase dividends over time, to satisfy investors and signal financial strength.