What is a capital dividend?

A capital dividend is a type of dividend that is drawn from a company's capital base, as opposed to its retained earnings. Regular dividends are paid from earnings, representing a share of the profits, and are a sign of good financial health as the company has the ability to distribute additional earnings.

What is a regular dividend?

Regular dividends refer to a portion of a company’s profits that the organization may issue in additional shares, cash payments, or a different form of property. A cash dividend is the most popular form of dividend payment. As the name suggests, companies pay this dividend in cash.

Are capital dividends a sign of financial trouble?

Capital dividends are often seen as a signal that a company lacks spare cash to pay dividends, indicating possible financial trouble. Companies that pay dividends and that are struggling financially sometimes have the option of stopping dividends until their finances are back on track.