Jan 27, 2020 · A dividend is a share of profits and retained earnings that a company pays out to its shareholders. When a company generates a profit and accumulates retained earnings, those earnings can be either reinvested in the business or paid out to shareholders as a dividend.
Dividend | Definition of Dividend by Merriam-Webster
A major advantage of paying dividends is that they can help provide shareholder loyalty. Companies with a history of dividend payments are expected to maintain those payouts if possible. The major disadvantage of paying dividends is the cash paid out to investors cannot be used to grow the business.
When a dividend is paid, several things can happen. The first of these are changes to the price of the security and various items tied to it. On the ex-dividend date, the stock price is adjusted downward by the amount of the dividend by the exchange on which the stock trades.
A dividend is a distribution of a portion of a company's earnings, decided by the board of directors. The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: cash and stock.