Dividends

Dividends are payments made by a corporation to its shareholders, typically drawn from profits or accumulated earnings. They can take the form of cash dividends, which distribute money per share, or stock dividends, which issue additional shares proportional to holdings.

Dividends are declared by a company’s board of directors and are not guaranteed. The most common rhythm is quarterly, but some companies pay monthly, semiannually, or irregularly. The process follows key dates: declaration, ex-dividend, record, and payment. To receive the upcoming dividend, investors must own the shares before the ex-dividend date. On or after this date, the stock price often adjusts downward by the dividend amount. A payout ratio and a dividend policy describe how much earnings are returned to shareholders and how sustainable the payments are.

Dividend yield measures income relative to price (annual dividends per share divided by price). Dividends per share (DPS) is the amount paid per share. In many jurisdictions, dividends may be taxed; in the United States, dividends may be classified as qualified or ordinary, with qualified dividends generally taxed at lower rates if holding period requirements are met.

Dividends are not guaranteed; a company can reduce or suspend payments during downturns. Some investors rely on dividends for income, while others seek capital gains. Companies may also issue special or one-time dividends outside normal policy.

Related concepts include dividend reinvestment plans, which automatically use dividends to purchase additional shares, and various strategies such as pursuing high yield, stable, or progressive dividend policies.