A dividend is a payment by a corporation to its shareholders. Dividend payment may come in different forms, such as cash, stock, or (rarely) property. For most shareholders dividend payments are taxable as ordinary income. All decisions concerning dividend imbursement are made by the board of directors of the corporation. Although in principle dividends are portions of company earnings, most corporations are not eligible to receive tax deductions on dividend payment. Traditionally, dividends tend to be offered by well established, stable, secure blue chip companies. In effect, the financial reward offered by the dividend compensates for a rather stagnant movement of the stock. Conversely, more dynamic companies do not offer dividends as their profits are reinvested to secure superior growth. |
