dividend
DIV-i-dend
/ˈdɪvɪdɛnd/
A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves.
Dividends are a portion of a company's earnings distributed to its shareholders. Not all companies pay dividends; growth companies often reinvest profits.
The story behind the word. The word 'dividend' comes from the Latin 'dividendum,' meaning 'a thing to be divided.' It entered English in the 15th century, initially referring to a share or portion. Its specific financial meaning, as a portion of a company's profits divided among its shareholders, became established in the 17th century with the rise of joint-stock companies.
Word relationships
- payout: A more general term for money paid out, 'dividend' specifies it's from company profits to shareholders.
- distribution: Broader term for sharing something, 'dividend' is a specific type of profit distribution.
Commonly confused with
- interest: 'Dividend' is a share of company profits paid to shareholders; 'interest' is a payment for the use of borrowed money (e.g., from a bond).
Word family
- dividend-paying (adjective): Referring to a company or stock that pays dividends.
Collocations
- cash dividend
- stock dividend
- dividend yield
- dividend payment
- pay a dividend
- reinvest dividends
Example sentences
- "The company announced a quarterly dividend of 50 cents per share, much to the delight of its long-term shareholders." Many income-focused investors rely on consistent dividend payments.
- "She chose stocks that offered a stable dividend history, prioritizing income over aggressive growth." Reinvesting dividends can significantly boost long-term returns through compounding.
Memory hook
A 'DIVIDEND' is a 'DIVIDED' portion of company profits. DIVIDEND: DIVIDED profit.
When not to use
Do not use 'dividend' to refer to interest payments from bonds or general profits not distributed to shareholders.
Fun facts
- Some companies offer 'dividend reinvestment plans' (DRIPs), allowing shareholders to automatically use their dividends to buy more shares of the company.
- The 'dividend yield' is calculated by dividing the annual dividend per share by the share's current price.
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