Legal Dictionary

dividend

Legal Definition of dividend

Noun

  1. A proportionate distribution of profits made in the form of a money payment to shareholders, by a for-profit corporation. Dividends are declared by a company's board of directors.

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

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.

References:

  1. Wiktionary. Published under the Creative Commons Attribution/Share-Alike License.



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