What is the dividend?

      A dividend is a payment made to shareholders from a company's earnings. Dividends are often paid in cash if the underlying stock is held, but they may also be paid in the form of extra shares to investors. This may be done on a regular basis, at predetermined intervals, or at irregular periods dependent on the company's top management decisions. Dividend payments are made to shareholders depending on the amount of the dividend per share and the number of shares they own.


      Many corporations may prefer not to pay cash dividends to shareholders, preferring to reinvest the proceeds in the company if they feel the capital would better reward shareholders via higher profit growth.


      In the case of a stock index, if several of the firms that comprise the index pay dividends at the same time, the value of one of the many indexes might be affected. Each firm is assigned a percentage weighting in the index based on its market capitalization. When the most highly weighted firms pay dividends, the index adjusts to a larger degree.

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