An investor receives a dividend when a company distributes part of its profits or accumulated reserves to shareholders.
Dividends are commonly paid in cash, although companies can also issue stock dividends or make other kinds of distributions. A company’s board typically declares the dividend, and the amount may be quoted per share, such as 50 cents per share.
Several dates matter. The declaration date is when the company announces the payment. The ex-dividend date determines which buyers qualify, the record date identifies eligible shareholders, and the payment date is when the distribution is delivered.
A dividend is not the same as a bond coupon. A coupon is contractual interest promised by a bond issuer, while a company may reduce, suspend, or omit a dividend. A stock’s market price can also fall by approximately the dividend amount when it begins trading ex-dividend, although actual price movements depend on market conditions.