What is a dividend in stock-market investing?

A dividend is a payment to shareholders. Companies that declare dividends distribute part of their earnings, cash reserves, or other available assets to holders of eligible shares according to the company’s stated terms.

Dividends are commonly paid in cash, though companies can also issue stock dividends or use other forms. The board of directors normally declares the dividend and specifies important dates, including the amount per share and the record date. An investor must meet the relevant ownership timing rules to receive the payment.

Dividends are not guaranteed. A company can reduce, suspend, or eliminate them, especially when profits weaken or management wants to preserve cash. The dividend yield compares annual dividends with the share price, but yield alone does not show whether a company is financially healthy. Investors also distinguish dividends from capital gains, which arise when an investment is sold for more than its purchase price.