Dividend Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Dividend, written in plain English, along with examples of how it is used.

What is Dividend?

n. A share of profit that is distributed to shareholders for the amount of shares that are owned. The portion of profit realized is determined by the amount of a corporation’s shares of stock and rate of distribution that was approved by the board of directors or management. Stock dividends can take the form of stock shares or money.

History and Definition of Dividend

Dividends are a distribution of a portion of a company's earnings to its shareholders, based on the number of shares they own. It is a way for companies to share profits with their investors while also demonstrating stability and potential for future growth. The practice of issuing dividends has been around for centuries and is seen as a way to incentivize investors to buy and hold stocks for the long term, as well as a means of rewarding them for their investments.

Dividends can be paid out in the form of cash or additional shares of stock, depending on the preference of the company's management or board of directors. Typically, dividends are issued on a quarterly or annual basis, although some companies may choose to offer special dividends outside of this regular schedule.

Examples of Dividend

  1. Apple Inc. announced a dividend of $0.82 per share in their most recent quarterly earnings report.
  2. Exxon Mobil Corporation pays an annual dividend of $3.48 per share.
  3. Coca-Cola Company's board of directors approved a 2-for-1 stock split, which also doubled the number of shares eligible for dividend payments.
  4. Microsoft Corporation increased its dividend by 11% in September 2021.
  5. Johnson & Johnson has a history of consistently paying dividends and has increased its dividend payout for 59 consecutive years.

Legal Terms Similar to Dividend

  1. Stock Split: A corporate action where a company increases its number of outstanding shares by dividing each share, thereby reducing the price per share and making the stock more accessible to a wider range of potential investors.
  2. Yield: The amount of income an investment earns over a specific period, expressed as a percentage of the investment's cost.
  3. Capital Gains: The amount by which an asset's selling price exceeds its initial purchase price, resulting in a profit for the investor. Capital gains can be realized through dividends or by selling the asset for a higher price.