Dividend

A distribution of cash (occasionally shares) from a company to its shareholders, declared at the discretion of the board out of the company's available profits.

Example

A board declares 1.00 per share on 200 million shares, paying out 200m of cash.

Important

A dividend is declared, not owed. A long history of paying one creates an expectation, never an entitlement, and it can be cut at any board meeting.

Related terms

• Dividend yield — The cash dividend paid over a year divided by the current share price - the income return actually received by a holder.
• Payout ratio — The share of earnings paid out as dividends. What remains is retained and reinvested in the business.
• Ex-dividend date — The date from which a share trades without the right to receive the next declared dividend. Buy on or after it and the payment goes to the seller.
• Share buyback — A company purchasing its own shares in the market and cancelling them, so that the same earnings are divided among fewer shares and each remaining holder owns a larger proportion.

Lessons that explain it

• Where an equity return comes from: cash paid out, and cash kept in — Two sources, one pool. A company either hands you cash or reinvests it on your behalf - and a company that reinvests is not withholding your return. (11 min)

All 578 terms in the Investing glossary