1. A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most oftern quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.
Also referred to as "Dividend Per Share (DPS)."
2. Mandatory distributions of income and realized capital gains made to mutual fund investors.
- Dividends may be in the form of cash, stock or property. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move much, but the dividend attempts to make up for this.
High-growth companies rarely offer dividends because all of their profits are reinvested to help sustain higher-than-average growth.
- Mutual funds pay out interest and dividned income received from their portflio holdings as dividends to fund shareholders. In addition, realized capital gains from the portfolio's trading activities are generally paid out (capital gains distribution) as a year-end dividend.