What are Dividends?

Dividends (Definition)

Dividends are what a business pays out to shareholders from company earnings. Dividends can be issued as cash, shares of stock or other property. The board of directors decide the amount or percentage and the way in which the dividends are distributed to the shareholders. Shareholders must approve the decision. They are usually paid on a regular basis, although a business is not obligated to pay dividends. Dividends are paid from any residual profits after the business has paid all creditors. A business may choose not to pay dividends if they have encountered a cash shortage or if they require funds to reinvest to grow the existing business. Dividends are paid in proportion to their shareholding.