A portion of a company’s profit that is paid to shareholders.

When a company chooses to return a portion of its profit to its shareholders – usually expressed as a percentage – this is known as a dividend. This is an alternative to the company simply choosing to reinvest all of its profit back into the business, and is one of the ways a company’s shareholder can hope to gain a profit from their investment.

What if the company does not offer a dividend?

In this case, the company’s shareholders will hope to be compensated in the form of their shares increasing in value.

Practical Application Example

“ A dividend tends to come in the form of either a one-off or regular cash payments, although it can also be paid in property or further shares of stock. Companies choosing to pay a dividend are required by law to hold a board meeting to agree the dividend declaration, and must record the meeting minutes in the company’s records. ”