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Investing

Dividend

A share of a company's profits paid out to its shareholders, usually in cash.

When a company earns a profit, it can reinvest it in the business or return some to shareholders as a dividend. Not all companies pay dividends — many growing firms reinvest everything instead.

Dividends provide income on top of any rise in the share price, but they are not guaranteed and can be cut if a company's fortunes change.

Key points

  • A payout of company profits to shareholders.
  • Optional — many growth companies pay none.
  • Not guaranteed; can be reduced or stopped.

Related terms

Blue-chip Stock

Shares of a large, well-established, financially sound company with a long track record.

Market Capitalisation

The total market value of a company's shares, calculated as the share price multiplied by the total number of shares.

Net Asset Value (NAV)

The per-unit value of a mutual fund, calculated as the total value of its holdings minus expenses, divided by the number of units outstanding.

Expense Ratio

The annual fee a mutual fund charges to manage your money, expressed as a percentage of your investment.