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A distribution of money or other property made by a corporation or other entity to its shareholders or investors out of its earnings and profits.
A share of the company earnings paid out quarterly to stockholders, usually in cash, but sometimes in the form of additional shares of stock.
Corporations may pay part of their earnings as dividends to you and other shareholders as a return on your investment. These dividends, which are often declared quarterly, are usually in the form of cash, but may be paid as additional shares or scrip.
You may be able to reinvest cash dividends automatically to buy additional shares if the corporation offers a dividend reinvestment program (DRIP).
Dividends are taxable unless you own the investment through a tax-deferred account, such as an employer sponsored retirement plan or individual retirement annuity (IRA). That applies whether you reinvest them or not.
However, dividends on most US and many international stocks are considered qualifying dividends. That means you owe tax at your long-term capital gains rate provided you have owned the stocks the required length of time.
Dividends on real estate investment trusts (REITs), mutual savings banks, and certain other investments aren't considered qualifying and are taxed at your regular rate.
- Browse Related Terms: Capital gains distribution, Compounding, Direct investment, Direct purchase plan (DPP), Distribution, dividend, Dividend reinvestment plan (DRIP), dollar cost averaging, Fractional share, Growth, January Effect, reinvestment, total return, Total return index
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A periodic payment or distribution of earnings made by a company to stockholders.
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