dividend

noun div·i·dend \ ˈdi-və-ˌdend , -dənd \
Updated on: 15 Nov 2017

Definition of dividend

1 : an individual share of something distributed: such as
a : a share in a pro rata distribution (as of profits) to stockholders
  • Profits are distributed to shareholders as dividends.
b : a share of surplus allocated to a policyholder in a participating insurance policy
2 a : a resultant return or reward
  • our efforts are finally paying dividends
b : bonus
3 a mathematics : a number to be divided
b : a sum or fund to be divided and distributed

dividendless

play \-ləs\ adjective

Examples of dividend in a Sentence

  1. Profits are distributed to shareholders as dividends.

  2. the reward money was an unexpected dividend for our good deed

Recent Examples of dividend from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'dividend.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of dividend

Middle English divident, from Latin dividendus, gerundive of dividere — see 1divide


Financial Definition of DIVIDEND

cumulative dividend

What It Is

A cumulative dividend is a dividend, usually on preferred shares, that must be paid before any other dividends on any of the issuer's other securities. Preferred stock that does not carry a cumulative dividend is referred to as "straight preferred."

How It Works

Let's assume Company XYZ issues some preferred stock with a $1-per-share cumulative quarterly dividend. Company XYZ also has some common stock outstanding on which the company paid a $0.50-per-share dividend last quarter.

Now let's assume a recession has taken a toll on Company XYZ's cash flow, and the board has decided to suspend dividend payments. Because the preferred shares have a cumulative dividend, once Company XYZ decides to resume making dividend distributions, it must first "catch up" on any missed dividends payments to the preferred shareholders (those outstanding the longest are paid first). Then it can resume making dividend payments to the holders of its common stock. It must do this even if it does not completely suspend the preferred dividends; reducing them creates a similar obligation.

Why It Matters

Preferred shares that have cumulative dividends often have slightly higher rates of return than straight preferred because cumulative preferred carries the added risk of possibly not receiving regularly scheduled dividend payments.


dividend

What It Is

Dividends represent a distribution of corporate earnings to company shareholders and usually take place in one of two forms -- cash or stock. Each organization's board of directors determines the actual dividend amount that the firm will pay out. Most cash dividends are paid on a quarterly basis. Meanwhile, stock dividends are generally paid at infrequent intervals.

How It Works

When researching a company, it is important to recognize when they pay dividends. However, it is easy to be confused by several different dates a company may specify when informing investors of their dividend structure. You should be aware of the following terms:

Dividend Declaration Date: This is the date on which a company's board of directors declares that a dividend will be paid. The board determines the amount of the dividend, as well as when it is to be paid to shareholders on record.
Dividend Record Date: This is the date on which a company reviews its books to determine its "shareholders of record." Shareholders who hold a particular stock on this date will receive the firm's dividend payment.
Ex-dividend Date: After the Record Date has been determined, the stock exchanges or the National Association of Securities Dealers (NASD) assign the ex-dividend date. The ex-dividend date for stocks is typically two business days prior to the record date. If an investor buys a stock before the ex dividend date, then they will receive the dividend payment. If they purchase the stock on or after the ex-dividend date, then they are not entitled to receive the dividend. On the ex-dividend date, a firm's share price usually declines to reflect the amount of the dividend paid. For example, if a stock is trading at $100 and pays a quarterly dividend of $3 per share, then, all other things being equal, the stock will open on the ex-dividend date at $97.

Why It Matters

Many investors rely on dividend payments as a source of income. Say you are retired and hold a significant proportion of your investment portfolio in stocks. Even if share prices of your stocks increase over time, you will be unable to realize these capital gains until you sell your shares. However, if these stocks pay dividends, you will receive a check in the mail (usually four times a year) for your share of the companies' profits.

Dividend payments are very important to the relationship between company and investor. In recent history we saw General Motors cut their long-running dividend in an effort to avoid bankruptcy during the financial crisis that started in 2008. This enraged many former GM employees who lived on dividend payments from the corporation. Additionally, there have been cases of a company's stock price falling amid talks of cutting dividends, showing that a stable dividend payout is integral to a company's financial well-being.



DIVIDEND Defined for English Language Learners

dividend

noun

Definition of dividend for English Language Learners

  • finance : an amount of a company's profits that the company pays to people who own stock in the company

  • : an advantage or benefit that you get because of something you have done

  • mathematics : a number that is being divided by another number


DIVIDEND Defined for Kids

dividend

noun div·i·dend \ ˈdi-və-ˌdend \

Definition of dividend for Students

1 : a number to be divided by another number
2 : an amount of a company's profits that is paid to the owners of its stock

Law Dictionary

dividend

noun div·i·dend \ ˈdi-və-ˌdend \

legal Definition of dividend

1 : the part of corporate net earnings distributed usually periodically (as quarterly) to stockholders in the form of cash, additional shares, or property either as a set amount per share or a percentage of par value
constructive dividend
: a benefit (as unreasonable compensation or use of corporate property) or transfer of funds from a corporation to a shareholder that is interpreted by a taxing authority as a dividend
cumulative dividend
: a dividend distributed to preferred stockholders that is added to and paid with the next payment or future payments if not paid when due
extraordinary dividend
: a dividend declared in addition to a regular dividend because of unanticipated profits or a nonrecurring increase of revenue
2 : a share of the surplus earnings of a mutual insurance company paid to policyholders either in the form of cash disbursements or through reduction of premiums
3 : a payment disbursed to investors from the income of a mutual fund


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