Dividends

A dividend is a distribution of profits by a corporation to its shareholders.

When a corporation earns a profit, it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation usually is prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets.

Companies that are paying and increasing dividends for more than 25 years consecutively are called - Dividend Aristocrats.