Definition of Dividend

What is a dividend? What is the definition of a dividend? Why do some companies pay out dividends, while other companies do not?

A dividend is some form of a taxable benefit that is paid out to the shareholder of a company.

Dividends usually take the form of:

-cash dividend (the most common)
-stock dividend

Many companies pay out their dividends on a regular basis (usually quarterly).

Why would a company pay out a dividend?

A company that pays out a dividend is usually a long-established company that generates profits on a very consistent basis.

Dividends are paid out in order to encourage shareholders to continue holding shares in the company, as well as building sustained, long-term shareholder value.

Dividends are paid out of current or retained earnings.

Companies are not required to pay out dividends - many companies do not.

Companies are also not required to continue paying out dividends if they have done so in the past, but cutting or eliminating a dividend is usually a sign of poor health for a company.

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