Legal Definitions - cash dividend

A cash dividend is a direct payment of money made by a company to its shareholders. It represents a distribution of a portion of the company's accumulated profits or earnings to those who own its stock. When a company declares a cash dividend, it means that for each share of stock an individual owns, they will receive a specified amount of money.

• Example 1: "GlobalTech Innovations," a well-established and highly profitable technology company, announces that its board of directors has approved a cash dividend of $0.75 per share. An investor who owns 2,000 shares of GlobalTech Innovations stock would receive a payment of $1,500 directly into their brokerage account.

  Explanation: This illustrates a cash dividend because the company is distributing a specific amount of money ($0.75) for each share owned, directly to its shareholders, as a portion of its earnings.

• Example 2: "Evergreen Utilities," a public utility company known for its stable earnings, has a long-standing policy of paying quarterly cash dividends to its investors. For the current quarter, the company declares a dividend of $0.50 per share.

  Explanation: This demonstrates a recurring cash dividend, where the company consistently pays out a portion of its profits in monetary form to its shareholders on a regular schedule, providing them with a steady income stream from their investment.

• Example 3: After an exceptionally successful year driven by a new product launch, "Precision Manufacturing Co." decides to issue a special, one-time cash dividend of $1.50 per share, in addition to its regular annual dividend. This is intended to reward shareholders for the company's outstanding performance.

  Explanation: This example highlights that cash dividends can also be special, non-recurring payments of money from a company's profits, distributed directly to shareholders to celebrate a particularly strong financial period.