Dividends are payments made by a corporation to its shareholders. When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business ie retained earnings, or it can be paid to the shareholders of the corporation as a dividend. Corporations retain a portion of their earnings and pay the remainder to their shareholders. Publicly-traded corporations usually pay dividends on a fixed schedule, commonly annually, bi-annually or quarterly: however, they may declare a dividend at any time. Dividends are normally paid in cash but also sometimes take the form of the shares in the company. The profits of a corporation can either be reinvested in the business or paid to its shareholders as a dividend. The frequency of these varies by country. In the United States dividends of publicly traded companies are normally declared quarterly by the board of directors. In some other countries dividends are paid bi-annually, as an interim dividend shortly after the company announces its interim results and a final dividend typically following its annual meeting who will then vote on the proposal.

Forms of Payment:

Cash dividends which are most common are those paid out in cash. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid. This is the most common method of sharing corporate profits with the shareholders of the corporation.

Stock/Scrip dividends are those paid out in the form of additional stock shares of the issuing corporation. They are usually issued in proportion to shares owned (e.g. for every 1000 shares of stock owned, 5% stock dividend will yield 50 extra shares). This is very similar to a stock split in that it increases the total number of shares while lowering the price of each share and does not change the market capitalization or the total value of the shares held.

Property dividends are those paid out in the form of assets from the issuing from the issuing corporation or another corporation, such as a subsidiary corporation. They are rare and most frequently are securities of other companies owned by the issuer, however they can take other forms, like products or services provided by the corporation.

There are several key terms to understand when investing in dividend paying companies some of which include:

Dividend Re-Investment Plan: A plan offered by corporations allowing investors to reinvest their cash dividends by purchasing additional shares on the dividend payments date.

Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to

its share price. The dividend yield is calculated as the latest dividend rate divided by the stock’s latest closing price.

Dividend Rate: If a company's board has committed to dividend payments in the future, the latest reported dividend rate equals the number of times the company pays dividends per year times the latest dividend, expressed in dollars. If a company's board has not committed to dividend payments in the future, the latest reported dividend rate equals the total dividends paid in the past 12 months.

Dividend Payout Ratio: The current payout is the LTM dividend per share divided by LTM EPS, expressed as a percentage. The percentage indicates the percent of EPS that was paid out as a dividend.

Dividend Screener™: An internet based tool used to screen dividend paying stocks for growth, yield etc.

Dividend Ranking™: An internet based tool used to rank dividend paying companies in terms of the yield, growth etc.

Dividend Top 100™: An internet based tool used to sort the Top 100 Dividend paying companies by exchange or sector etc.

Dividend Analyzer™: An internet based tool used to analyze dividend paying companies.

Dividend Declaration Date: The date on which the next dividend payment is announced by the directors of a company. This statement includes the dividends size, ex-dividend date and payment date.

Ex Dividend Date: The major exchanges require 4 business days prior to the Record Date for recording ownership changes. The day that begins this 4-day period is the Ex-Date. Investors who purchase the stock prior to the Ex-Date are eligible for the latest dividend; investors who purchase the stock on or after the Ex-Date are not entitled to the dividend. Empirical evidence has shown that this is also the date that the market reflects the dividend policy in the stock price.

Dividend Record Date: The date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution.

Dividend Pay Date: The date on which a declared stock dividend is scheduled to be paid.

Dividend Growth: The amount of dividend payout increase/decrease vs previous payouts.

Cash Dividend: Money paid to shareholders, normally out of the corporation’s current earnings or accumulated profits.

Dividend Policy: The policy a company uses to decide how much it will pay out to shareholders in dividends.

Special Dividend: A non-recurring distribution of company assets, it is also known as an “extra” dividend.

Stock Dividend: A dividend payment made in the form of additional shares.

Stock Investing: A term used for the investor that purchases common stocks trading on stock exchanges.

Online Stock Trading: A way to purchase a stock online, normally through online brokers.

Stock Quote: A list of prices for a stock at a particular point during the trading day.

Stock: A type of security that signifies ownership in a corporation. There are two main types of stock: common and preferred.

Dividend History: The length of time a company has paid out dividends.

Dividend ETF: A security that tracks a dividend index, a commodity or a basket of assets like an index fund. An ETF trades like a stock and it is normally bought and sold throughout the trading day.

Dividend Capture: A term used in the process of purchasing a stock prior to the ex-dividend date.

Dividend Calendar: The payment timetable for a corporations annual dividend payouts.

Qualified Dividend: A certain type of dividend to which capital gains tax rates are applied.

Dividend Stock: A security that pays a dividend usually in the form of a cash payout.

Dividend Discount Model: A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value.

Canadian Dividend Stocks: The Toronto Stock Exchange lists many dividend paying stocks.

UK Dividend Stocks: The London Stock Exchange lists many dividend paying stocks.

Dividend Investing: A certain type of investment strategy focused on dividend paying companies.

DividendInvestor.com™ is a leading worldwide independent provider of dividend information and data for investment professionals. Our mission is to be the First In Dividend Data Worldwide™ by designing and developing essential tools and systems for the investment community with the highest level of accuracy and integrity. Financial planners, advisors and individual investors worldwide utilize DividendInvestor.com™ to research dividend data in order to make wise investment decisions. With proprietary tools for our members such as the Dividend Analyzer™, Screener™, Ranking™ and others, financial investors have the power to make their own informed dividend stock investment decisions. The world’s best value investors have long understood the power that dividends can provide. Many market analysts agree that historically, over 40% of the total stock market’s return has come from dividends. With such an amazing historical performance, it is easy to understand why dividends have become so critical when it comes to investing.