What is a Dividend?
A dividend is a share profit of a company’s earning to a particular class of its shareholders. The amount is determined by the company’s board of directors. When a company makes profit and accumulates retained earnings, those can be reinvested in the company or paid out as dividends. Dividends are paid out as cash or in the form of additional stock. Dividend yield is the annual dividend per share divided by the share price.
Types of Dividends
Cash
Actual cash payment to shareholder usually made electronically and may also be paid check or cash.
Stocks
Stock dividends are paid out by issuing new shares from the company to the shareholders.
Assets
Dividends can also be paid in forms of assets such as, investment securities, physical assets, and real estate but it’s not common.
Special
A dividend that is paid outside of the company’s regular policy.
Common
Refers to the class of shareholders.
Preferred
Refers to the class of shareholders receiving the payment.
A dividend is a distribution of cash or stock to a class of company shareholders which are usually drawn from the company’s retained earnings. Some types of dividends are stocks, cash, special, common, preferred and assets. The board of directors are the ones that decides who receives dividend and when. Dividend payout helps to provide insight into a company’s intrinsic value.
Source: Investopedia, Corperate Finance Institute
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