The regular cash payment that a company may distribute to shareholders is called a dividend.
A dividend is normally paid from a company’s profits or other legally available funds, although the board of directors decides whether to declare one. The amount is often quoted per share, so an investor’s total payment depends on the number of eligible shares held.
Companies can pay dividends quarterly, semiannually, annually, or on another schedule. Some businesses do not pay dividends and instead reinvest cash in operations, acquisitions, research, or expansion. A dividend is not guaranteed merely because a company paid one in the past.
Important dates include the declaration date, ex-dividend date, record date, and payment date. Investors who buy on or after the ex-dividend date generally do not receive that upcoming dividend. Dividends are different from bond coupons, which are contractual interest payments under a bond’s terms, and from capital gains, which result from selling an asset for more than its cost.