Dividend
DIV-ih-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 way for companies to distribute earnings to owners. Not all companies pay dividends; growth companies often reinvest profits.
The story behind the word. The word 'dividend' comes from the Latin 'dividendum', which means 'a thing to be divided'. It's the gerundive form of the verb 'dividere', meaning 'to divide'. This perfectly describes the financial concept: a dividend is a portion of a company's profits that is 'to be divided' among its shareholders. The term entered English in the 16th century, initially referring to a share of profit.
Word relationships
- Payout: A more general term for money paid out; 'dividend' specifies it's from company profits to shareholders.
- Distribution: A general term for something distributed; 'dividend' specifies profit distribution to shareholders.
- Retained earnings: Profits kept by the company for reinvestment rather than paid out as dividends.
Commonly confused with
- Yield: A 'dividend' is the actual payment; 'yield' is the dividend expressed as a percentage of the share price.
Word family
- Dividend-paying (adjective): Referring to a company or stock that pays dividends.
Collocations
- quarterly dividend
- annual dividend
- dividend yield
- dividend payment
- cut dividend
Example sentences
- "The board of directors approved a quarterly dividend of 50 cents per share." Company earnings
- "Many retirees rely on consistent dividend payments for a portion of their income." Income investing
- "Companies that consistently pay and grow their dividends are often favored by long-term investors." Investment strategy
Memory hook
A 'dividend' is a 'division' of profits, 'divided' among shareholders. Divided profits
When not to use
Do not confuse 'dividend' with 'interest' (paid on bonds or loans) or 'capital gains' (profit from selling an asset).
Fun facts
- Some companies offer 'dividend reinvestment plans' (DRIPs), allowing shareholders to use their cash dividends to buy more shares of the company's stock, often without commission.
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