Dividend
Dividend is the rate of return expected by the shareholders on the share capital. Dividend is a taxable remittance payed to the shareholders out of the organization’s retained or current earnings, which simply means the profit. It is usually paid quarterly. Organizations are not bound to pay dividends. Dividend can be payed in form of cash or in the form of property or stocks. Dividend will be payed, if only there are profits.
Dividend is usually paid by MNCs and profit-making public sector undertakings in order to reward their shareholders. But, it is not always necessary that companies give out dividend whenever they earn profit. In case the company is planning to expand its business, it may retain its profit instead of distributing them.
Dividend Payout Ratio
In order to understand the concept of dividend, it is essential to understand Dividend Payout Ratio. Dividend Payout Ratio is defined as the percentage of profit that the company decides to pay out to the shareholders in form of dividend.
Dividend Yield
Another important concept related to dividend is Dividend Yield. Dividend Yield refers to the amount of dividend payed by a company in correlation to the price of its stock. Higher the dividend yield, higher will the return for the shareholders. Dividend Yield is calculated by dividing the dividend payed annually by the price of the stock of a company.
