Dividends are the payment of a corporation
's profits to the shareholders
. Payment of dividends are generally not mandatory; rather, the board of directors
may use its discretion to decide whether to invest the company's profits back into the company, or to pay them out in dividends.
Definition from Nolo’s Plain-English Law Dictionary
A portion of profits distributed by a corporation to its shareholders based on the type of stock and number of shares owned. Dividends are usually paid in cash, though they may also be paid in the form of additional shares of stock or other property. The amount of a dividend is established by the corporation's board of directors; however, state laws often restrict a corporation's ability to declare dividends by requiring a minimum level of profits or assets before the dividend can be approved.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:15 pm