Dividend

The distribution of part of a company’s earnings to shareholders, usually twice a year (quarterly in the US). In the UK, there is traditionally a main dividend and an interim dividend during a company’s accounting year. Normally, the dividend is expressed on a ‘per share’ basis, for instance – 3p per share. This makes it easy to see how much of the company’s profits are being paid out, and how much are being retained by the company to plough back into the business. So a company that has earnings per share in the year of 6p, and pays out 3p per share as a dividend, is passing half of its profits on to shareholders and retaining the other half. Directors of a company have discretion as to how much of a dividend to declare, and they do not have to pay a dividend at all. Indeed, for young growth companies making no profits dividends are not generally expected. 

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