Cash Dividend
A Cash Dividend is a dividend paid in cash to shareholders, typically transferred via electronic funds or a mailed check.
Definition of Cash Dividend

When we refer to a cash dividend, we’re talking about a payment made by a company to its shareholders. It’s the portion of the company’s profits that is distributed to the owners of its shares. These dividends are usually paid out in monetary form (as opposed to stock dividends, which are paid out in additional shares).
Here’s what you need to know about cash dividends:
- Payment Frequency: Typically, dividends are paid quarterly, but they can also be issued monthly, semi-annually, or annually.
- Determination of Amount: The amount is usually determined by the company’s board of directors and is usually consistent per share, meaning every share gets an equal payout.
We’ll often look at the Dividend Yield and Payout Ratio to assess the attractiveness and sustainability of dividends. The Dividend Yield is expressed as a percentage and is calculated by dividing the annual dividends per share by the stock’s current market price.
Meanwhile, the Payout Ratio compares the dividend amount with the company’s earnings.
Here is a simple table to illustrate these concepts:
Term | Definition |
---|---|
Dividend Yield | Annual dividends per share / Market price of stock |
Payout Ratio | Annual dividends per share / Earnings per share |
It’s crucial for us, as investors, to understand that dividends are not guaranteed. A company’s board of directors can decide to increase, decrease or even not to pay dividends, depending on various factors like the company’s profitability, expansion plans, or economic conditions.