In personal finance, a portion of a company’s profit paid to its shareholders is called a dividend.
Companies may distribute dividends as cash, additional shares, or other property, although cash dividends are the form most individual investors encounter. A company’s board typically declares the payment, sets the amount per share, and announces important dates such as the record date and payment date.
Dividends are not guaranteed. A company can reduce, suspend, or eliminate them, and some profitable companies retain earnings to fund expansion rather than distribute money to shareholders. Dividend payments also do not represent a fixed interest obligation in the way a bond’s coupon generally does.
A dividend is different from a capital gain. A dividend is distributed by the company, while a capital gain generally results when an investor sells an asset for more than its purchase price. Dividend taxation depends on the investor’s country and circumstances.