A dividend is the portion of a company’s profits distributed to its shareholders as a reward for their investment. Dividends are usually approved by the board of directors, in accordance with the company’s profitability and financial strategy.

Characteristics of dividends

· They may be paid in cash, in the form of additional shares or, in some cases, through other assets.

· Distribution is not compulsory; it is driven by corporate policy and financial performance.

· They are calculated based on the number of shares held by each investor: those with more shares receive a larger proportion.

Types of dividends

· Ordinary dividends: these are paid out periodically (quarterly, half-yearly or annually) when the company makes a profit.

· Special dividends: these are paid in exceptional circumstances, when the company chooses to distribute surplus profits to its shareholders.

· Scrip dividends: instead of cash, shareholders receive additional shares, thereby increasing their stake in the company.

The payment of dividends can influence investors’ perception of the company’s financial strength and its long-term profitability. Some companies prefer to retain their earnings rather than pay dividends, reinvesting profits to drive corporate growth.

Sources:

https://dle.rae.es/dividendo