What is a dividend & how does it work?

A dividend is a payment made to a company's stockholders. Business and financial entities like publicly traded companies, master limited partnerships, and real estate investment trusts issue dividends as a means of distributing their after-tax earnings to investors. Mutual funds and exchange-traded funds pay dividends as well.

What is a special dividend?

Special dividends might be one-off payouts from a company that doesn’t normally offer dividends, or they could be extra dividends in addition to a company’s regularly scheduled dividends. Companies generally announce special dividends when they’ve been especially profitable and want to share earnings among shareholders.

Should a company issue dividends?

The company has a choice of returning some portion of its earnings to investors as dividends, or of retaining the cash to fund internal development projects or acquisitions. A more mature company that does not need its cash reserves to fund additional growth is the most likely to issue dividends to its investors.

Are dividends a sign of a healthy company?

Our opinions are always our own. Dividends are periodic payments made to investors who own stock in a company, fund, or partnership. The payment of regular, ever-increasing dividends is seen as a sign of a well-run, healthy company. Large, mature companies tend to pay the biggest dividends.