Business, Legal & Accounting Glossary
Cash dividend is a payment of cash to you from a company as a sharing of the company’s profits.
Although every company is unique, dividends are typically paid quarterly, and the amount is determined by the board of directors. Investors seeking the highest possible profits often reinvest their cash dividend back into the company.
Dividends come in two flavors: cash and stock. Cash is, by far, the more common. Every year, six months, or quarter, depending on the company and, often, the country, a company may (not will) pass along some of its net income to its shareholders. Often, that is in the form of cash.
The shareholder can have several things done with that payment, depending on the company paying it, the size of the payment, and the broker.
Many companies avoid giving a cash dividend because of the dividend tax. A dividend tax is a tax, that shareholders must pay on their cash dividend. Companies who do use a cash dividend choose to use one partly because it suggests the financial stability of their company and makes their stock more attractive to investors. Many companies will consistently increase their cash dividend, even if their earnings are low. They do this because a consistently increasing cash dividend suggests stability and continuous growth.
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This glossary post was last updated: 4th August, 2021 | 0 Views.