dividend

Definition of dividend

Etymology

From Middle French dividende, from Latin dividendum ("thing to be divided"), gerund of divido ("to divide").

Noun

dividend (plural dividends)

1. (arithmetic) A number or expression that is to be divided by another.
   
   In "42 ÷ 3" the dividend is the 42.
   
   
2. (finance) A pro rata payment of money by a company to its shareholders, usually made periodically (eg, quarterly or annually).

Hyponyms

• (finance: pro rata payment): regular dividend, special dividend

Further reading

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

For a joint stock company, a dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of an asset among shareholders. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one.

Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense.

Dividends are usually settled on a cash basis, store credits (common among retail consumers' cooperatives) and shares in the company (either newly-created shares or existing shares bought in the market.) Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.