What is a dividend?

What is a dividend?

 

Dividends are the part of a company’s earnings directly distributed to its shareholders.

Their distribution and quantity is decided by the board of directors and approved by the assembly of the shareholders and they can be issued as cash payments (the most common case), additional shares or other types of assets.

Dividends can be structured as to be distributed as a periodical ongoing cash flow to shareholders (“ordinary dividends”), or as a one-time payment (“extraordinary dividend”): in this second situation, the special dividend is probably due to an unexpected increase in the net profits of the issuing company.

Larger and established companies are those which usually distribute regular dividends to their shareholders, while start-ups and firms in the technology or biotechnology sectors rarely offer dividends because they tend to use the majority of their profits to increase their growth and their expansion.

Sources:

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