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Dividend

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Dividend
A portion of Earnings paid to the owners of a credit union or Corporation. (A credit union's owners are called members; a Corporation's owners are called shareholders. Credit unions and banks both pay savers a percentage of the money in their savings accounts. Credit unions call this payment a dividend because their members are, by definition, owners. Banks call this payment Interest because their customers are not, by definition, owners. Bank dividends go to shareholders.)
    
Dividends are payments made by a Corporation to its shareholder members. When a Corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained Earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their Earnings and pay the remainder as a dividend.
    
The board of directors decides what the dividend rate, or percentage, Will be. Dividend payments are usually added directly to an account balance. But sometimes a Corporation Will issue dividends in the form of more stock in the company.

The dividend is normally expressed as a percentage of the nominal value of the ordinary share capital or as an absolute amount per share.
    
For example, if a company has issued Equity of £10m in the form of 500,000 £20 shares and the directors decide to distribute £1m, then they would declare a dividend of 10%, or £2 per share.
Posted by  Institute for International Research
 
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