Dividend

Definition: Payments made to shareholders by corporations. When a company earns profit, the company can use the money to either re-invest in the business (called retained earnings) or to give shareholders as dividends or share repurchase. Many corporations keep a portion of their profit and pay the remainder as a dividend.

Explanation: Corporations can pay dividends in the form of cash, stock or property. Most large profitable companies offer dividends to their stockholders. Their share prices might not move much, but the dividend they pay make up for this.

Higher-growth companies typically don’t offer dividends because their profits are reinvested to help continue their higher than average growth.

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