Definition of Dividend – Wealthspire

dividend definition

Dividends are a portion of a company’s profits paid out to common and preferred shareholders. They provide an incentive for their stock in stable companies, even if they are not experiencing much growth. Companies are not required to pay dividends.

How do dividends work?

Dividends are payments that a company makes to its shareholders to share its earnings and can be thought of as rewards paid to shareholders for their investments. There are many reasons why companies pay dividends, including the intention to increase investor confidence in the company and as a sign of optimism about future growth and earnings.

Dividends are paid according to the number of shares an investor holds. For example, if you own 30 shares and the company is paying $2 per share, you will receive a dividend of $60.

What are the Different Types of Dividends?

Common types of dividends include:

• cash dividends
• stock dividend
• Dividend Reinvestment Program (DRIP)
• special dividend
• preferred dividend

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This information should not be treated as a recommendation to buy, offer to sell, or solicit an offer to buy a particular security or investment strategy. Comment provided is for informational purposes only and should not be relied upon for accounting, legal or tax advice. While the information is believed to be reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness or suitability for any purpose, and makes no warranties with respect to the results obtained from its use. ©2011 Wealthspire Advisors.