Cash Dividends And Dividend Payment

The term dividend usually refers to cash paid out of earnings. If a payment is made from sources other than current or accumulated retained earnings, the term distribution, rather than dividend, is used. However, it is acceptable to refer to a distribution from earnings as a dividend and a distribution from capital as a liquidating dividend. More generally, any direct payment by the corporation to the shareholders may be considered a dividend or a part of dividend policy.

Dividends come in several different forms. The basic types of cash dividends are:

1. Regular cash dividends

2. Extra dividends

3. Special dividends

4. Liquidating dividends

Later in the chapter, we discuss dividends paid in stock instead of cash, and we also consider another alternative to cash dividends, stock repurchase.

regular cash dividend

A cash payment made by a firm to its owners in the normal course of business, usually made four times a year.

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