Legal Definitions - extra dividend

An extra dividend, also known as an extraordinary dividend, is a payment made by a company to its shareholders that is separate from and in addition to its regular, scheduled dividend payments. Companies typically declare an extra dividend when they have unexpectedly high profits, a significant one-time gain (like selling an asset), or a surplus of cash that they wish to distribute to investors beyond their usual payout policy. It is not expected to be a recurring payment.

• Imagine "Tech Innovations Inc." usually pays a quarterly dividend of $0.50 per share. In a particular year, due to the unexpected success of a new product line and higher-than-anticipated sales, the company reports record profits. The board of directors decides to distribute some of this excess profit to shareholders by declaring an additional, one-time dividend of $1.00 per share, alongside their regular quarterly payment. This $1.00 payment is an extra dividend because it's a special distribution above and beyond the company's established dividend schedule, driven by an exceptional financial performance.

• "Global Logistics Corp." operates a large fleet of ships and warehouses. They decide to sell off a non-core division, including several older warehouses, for a substantial profit. Rather than reinvesting all of the proceeds or holding onto the cash, the company's board opts to return a portion of this one-time gain to its shareholders. They announce a special cash payout of $3.00 per share, which is separate from their usual semi-annual dividend. This distribution is an extra dividend because it stems from a specific, non-recurring event (the sale of assets) and is not part of the company's regular dividend policy.

• Consider "Pharma Research Ltd.," a pharmaceutical company that successfully completed a major drug development project ahead of schedule and under budget, resulting in a significant cash surplus. While the company typically reinvests most of its earnings into research and development, the board determines that they have more cash than immediately needed for future projects and wish to reward long-term investors. They declare a special year-end dividend of $0.75 per share, in addition to their standard annual dividend. This payment is an extra dividend as it's a one-off distribution of surplus cash, not part of their ongoing, predictable dividend program.