Dividend

When a company earns a profit, it can keep the money to reinvest in the business or return some of it to shareholders. Dividends are the most common way of returning profits. They are usually paid quarterly, half-yearly or annually, depending on the company and country.

Dividends are typically declared as an amount per share. If a company pays an annual dividend of 1.50 per share and you own 200 shares, you receive 300. Dividends can also be expressed as a dividend yield, the annual dividend divided by the share price. A share priced at 50 paying 1.50 a year has a dividend yield of 3%.

Dividends are not guaranteed. A company's board decides whether to pay them and how much, and dividends can be cut or suspended if profits fall. Mature, stable companies often pay regular dividends, while fast-growing companies may pay none, preferring to reinvest.

To receive a dividend, an investor must own the shares before a cut-off date, called the ex-dividend date. In many countries, dividends are taxed as income.