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dividend


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1. The distribution of part of the earnings of a company to its shareholders. The dividend is normally expressed as an amount per share on the par value of the share. Thus a 15% dividend on a £1 share will pay 15p. However, investors are usually more interested in the dividend yield, i.e. the dividend expressed as a percentage of the share value; thus if the market value of these £1 shares is now £5, the dividend yield would be 1/5 × 15% = 3%. The size of the dividend payment is determined by the board of directors of a company, who must decide how much to pay out to shareholders and how much to retain in the business; these amounts may vary from year to year. In the UK it is usual for companies to pay a dividend every six months, the largest portion (the final dividend) being announced at the company's AGM together with the annual financial results. A smaller interim dividend usually accompanies the interim statement of the company's affairs, six months before the AGM. In the USA dividends are usually paid quarterly. See also dividend cover; yield.

Interest payments on gilt-edged securities are also sometimes called dividends although they are fixed.

2. A payment made by a co-operative society out of profits to its members. It is usually related to the amount the member spends and is expressed as a number of pence in the pound.

Subjects: Business and Management.


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