A share of the after-tax profit of an organization, distributed to its shareholders per the amount and sophistication of shares command by them is known as a dividend.
Smaller firms generally distribute dividends at the top of the associate degree accounting year, whereas larger, publically command firms typically distribute it quarterly. The quantity and temporal arrangement of the dividend are determined by the board of administrators, which conjointly verify whether or not it's paid out of current earnings or the past earnings unbroken as a reserve.
Holders of preferred shares receive a dividend at a hard and fast rate and are paid initially. Holders of common shares are entitled to receive any quantity of dividend, supported the amount of profit and also the companies would like for money for enlargement or alternative functions. Corporate legislation typically forbids payment of dividend out of anticipated however not nonetheless received (unrealized) profit. Usually, all dividend payments are nonexempt, usually at the supply.
