A dividend is a distribution by a company to its shareholders. Usually a dividend would be a portion of the company’s profits, as defined by the company’s ‘Payout Ratio’. Dividends are usually paid by companies with a more mature profile – they no longer need to reinvest 100% of profits for growth, and can afford to give some back to shareholders. Dividends are not a fait accompli – shareholders are not automatically entitled to dividends, they are simply part owners of a company. The company’s board of directors will (should!) decide how best to allocate the companies capital for the benefit of shareholders.

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