Dividend
A dividend is a payment a company makes to its shareholders, usually in cash and out of profits, as a reward for owning its stock.
A dividend is a way for a company to share its profits with its owners. The board of directors decides whether to pay a dividend, how large it is and when it is paid. In the US, most dividend-paying companies pay quarterly, while many European companies pay once or twice a year.
Dividends are usually stated per share. If a company declares a dividend of $0.60 per share and you own 200 shares, you receive $120. Some companies pay special one-time dividends, and some pay dividends in additional shares instead of cash.
Four dates matter: the declaration date, when the dividend is announced; the ex-dividend date, the cutoff for buying the stock and still getting the payment; the record date; and the payment date. On the ex-dividend date, the share price typically falls by roughly the dividend amount.
Dividends are not guaranteed. Companies can raise, cut or suspend them, especially when profits fall. Young, fast-growing companies often pay no dividend and reinvest their earnings instead. In the US, qualified dividends may be taxed at lower rates than ordinary income.