In corporate finance, a dividend is a payment a company distributes to its shareholders from profits.
Dividends may be paid in cash, shares, or other forms, although cash dividends are the most familiar. A company’s board typically declares a dividend and sets important dates, including the declaration date, ex-dividend date, record date, and payment date. Investors who own shares on the relevant record date generally qualify for the payment.
A dividend is not the same as a capital gain. A capital gain results when an asset is sold for more than its purchase price, while a dividend is a distribution made by the company. Companies can also retain earnings instead of paying dividends to fund expansion, repay debt, or preserve cash.
Dividend policies vary by industry and growth stage. Mature companies often have more predictable distributions, while rapidly expanding companies may reinvest profits instead.