Dividends

DIVIDENDS

Dividends are a sum of money paid to stockholders out of a corporation's earnings. Once a dividend has been declared, the percentage of dividend that stockholders receive is based on a dollar amount per share of stock owned by the stockholder. Preferred stockholders generally have a prior right to dividend payments over common stockholders. Dividends are usually paid in cash. However, they can also be distributed in other forms: stock dividends and stock splits; scrip, which is a company's promise to pay in the future; or property, such as inventory goods. Most commonly, corporations declare dividends at regular intervals, such as monthly, quarterly, or annually. Before a dividend is paid, the board of directors must make a dividend announcement. This announcement sets the amount of the dividend, the date of record, and the payment date. The date of record is important as all stockholders have the right to receive the dividend on that date. By law, dividends can be paid only from corporate profits; they can not be paid from a corporation's capital. This measure, known as the impairment of capital rule, is intended to protect the corporation's creditors.

See also: Capital, Stock