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Dividends

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Definition:

Dividends are payments, usually from a company's net income, to a company's shareholders. The Board of Directors of companies make decisions, based on the company's financial performance, about its dividend policy. Dividends are usually quoted in terms of the dollar amount each share of stock receives. Companies that are mature and stable are most likely to pay dividends, not companies that are in a growth phase. Those companies use their net income to plow back into the firm to finance their growth.

Mutual funds pay out interest and dividends from stocks and bonds in the fund as dividends to their shareholders.

Dividends are subject to a phenomenon in finance called double taxation. That money is taxed at the corporate level and then again when it reaches the level of the shareholder.

There is another type of dividend called a stock dividend.

See Stock Dividend

Examples:

XYZ, Inc. paid a dividend of $2.00 per share to its investors in third quarter of 2011.

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