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Dividend
Definition
A dividend is a portion of a company's earnings distributed to its shareholders, usually paid in cash or additional shares.
Explanation
Dividends represent a share of corporate profits returned to shareholders. They are typically paid quarterly and can be in cash or stock. Companies with stable profits and limited growth opportunities often pay dividends, while high-growth companies reinvest profits.
Dividend income is taxable. Qualified dividends receive preferential tax treatment in many jurisdictions. Dividend yield = annual dividend per share ÷ stock price.
Example
If you own 500 shares of a company paying $2 per share annually, you receive $1,000 in dividend income per year.