Dividend

A dividend is a payment, usually cash, that a company makes to shareholders from profits, normally a set amount per share. Companies that pay one often follow a fixed schedule, commonly every three months.

Say a company pays 50 cents per share each quarter. If you own 100 shares, you receive $50 a quarter, or $200 a year, though share prices can fall.

Dividends are not promised. The board of directors, elected by shareholders, decides each time whether to pay one, and a dividend can be cut or stopped when profits fall. Some companies pay none and put their profits back into the business instead. Funds that hold stocks pay out the dividends they receive, after the fund's costs. In a regular taxable account, dividends are taxable income in the year they are paid, even if they are automatically reinvested.