Cash dividend - Financial definition
Concise definition of the term cash dividend
A cash dividend is a payment made by a company to its shareholders, typically from its profits or reserves, distributed in the form of cash.
Comprehensive definition of the term cash dividend
In finance, a cash dividend is a type of dividend that companies pay to their shareholders in cash, as opposed to issuing additional shares or other forms of payment. This distribution is usually decided by the board of directors and can be given on a regular basis, such as quarterly or annually. For example, a corporation might declare a cash dividend of $1 per share, meaning that a shareholder owning 100 shares would receive $100. Cash dividends are a way for companies to return profits to investors and are often viewed as a sign of financial health. Market practices may include dividend reinvestment plans (DRIPs), allowing shareholders to reinvest their cash dividends to purchase additional shares of the company.
In addition to cash dividends, companies may also issue stock dividends, which involve distributing additional shares of the company, or property dividends, which involve the distribution of physical assets. These alternative forms of dividends can provide different benefits and tax implications for shareholders.