What is a dividend?

A dividend refers to the portion of corporate profits that a company distributes to its shareholders. Companies typically choose to pay dividends as a way to reward their investors for holding their shares and to share the company's earnings with them. Dividends can be issued in cash or as additional shares of stock and represent a tangible benefit for shareholders, providing them with a return on their investment in the company.

This distribution occurs after a company has paid its expenses and reinvested a portion of its profits back into the business. The decision to pay dividends and the amount paid can signify the company’s financial health and operational success, making it a key aspect of shareholder value.