Cash Dividend

A cash dividend is a payment made by a corporation to its shareholders, distributed from the company’s profits or retained earnings. Dividends are typically paid on a regular basis (quarterly, semi-annually, or annually) and provide shareholders with a return on their investment. Cash dividends are usually expressed as a per-share amount, meaning each shareholder receives a set amount of cash for each share they own.

Example

A company declares a cash dividend of $2 per share. A shareholder who owns 100 shares will receive $200 in cash dividends.

Key points

• Cash dividends are payments made to shareholders from a company’s profits or retained earnings.

• Dividends are usually paid regularly, providing income to shareholders.

• Companies paying dividends are often financially stable with consistent cash flow.

Quick Answers to Curious Questions

What is the purpose of a cash dividend?

Cash dividends provide shareholders with a portion of the company’s profits, offering a return on their investment.

How are cash dividends calculated?

Cash dividends are typically expressed as a per-share amount, meaning each shareholder receives a set amount of cash for every share they own.

Do all companies pay cash dividends?

No, not all companies pay cash dividends. Many growth companies reinvest profits into expansion rather than distributing them to shareholders.