dividend

A dividend is a distribution of a portion of a company’s earnings to its shareholders. It is most commonly paid in cash, but companies may also issue additional shares, property, or other forms of value. The decision to pay a dividend depends on profitability, cash flow, capital needs, and the company’s overall approach to capital allocation. Some firms, particularly younger or high-growth companies, pay little or no dividends and reinvest earnings instead.

Types of dividends include cash dividends, stock dividends, property dividends, and scrip dividends. Cash dividends provide shareholders with a cash payout per share. Stock dividends issue additional shares to shareholders rather than cash. Property dividends distribute non-cash assets, and scrip dividends are promissory notes or rights to receive future shares.

Key dates and processes involve a board declaring the dividend; the ex-dividend date determines eligibility, typically a couple of business days before the record date. The record date identifies shareholders entitled to receive the dividend, and the payment date is when the dividend is actually paid. On the ex-dividend date, the share price often falls roughly by the amount of the dividend.

Metrics used with dividends include dividend per share (DPS), dividend yield (annual dividends per share divided by the share price), and payout ratio (dividends per share divided by earnings per share). The total dividend payout equals DPS times the number of outstanding shares.

Tax and regulation vary by jurisdiction. Dividends may be taxed as income, with withholding taxes for non-residents in some cases. Regulatory rules govern declarations, timing, and record-keeping.

Dividend policy can influence investor appeal. Regular dividends attract income-focused investors, while changes in payout levels can signal corporate health or strategy. Dividends are one aspect of total return, which also includes capital appreciation.