Duhaime's Law Dictionary

Dividend Definition:

A proportionate distribution of profits made in the form of a money payment to shareholders, by a for-profit corporation. Dividends are declared by a company's board of directors.

Dividends, paid in cash, represents be proportionate distribution of net profits between the shareholders.

William Cook wrote:

"A dividend is a corporate profit set aside, declared, and ordered by the directors to be paid to the stockholders on demand or at a fixed time. Until the dividend is declared these corporate profits belong to the corporation, not to the stockholders, and are liable for corporate indebtedness.

"Dividends are declared by the directors and not by the stockholders."

In Mobile & Ohio, Justice Jackson of the United States Supreme Court wrote:

"The term dividend, in its technical as well as in its ordinary acceptation, means that portion of its profits which the corporation, by its directory, sets apart for ratable division among its shareholders."

But a board of directors will not always resolve to distribute all of the net profits. They will usually set aside a certain sum as a reserve.


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