Dividend

A company's board decides whether to pay a dividend and how much, and announces the amount per share together with key dates: the ex-dividend date, the record date and the payment date. Payment patterns vary: many US companies pay quarterly, UK companies typically pay twice a year as an interim and a final dividend, and many continental European companies pay once a year. One-off extra payments are called special dividends. Some companies offer new shares instead of cash, known as a scrip dividend, and many brokers can reinvest cash dividends automatically.

Dividends are not guaranteed. Unlike bond interest, which a company is obliged to pay, a dividend can be cut or suspended at any time, and often is when profits fall. Paying a dividend does not by itself make shareholders richer: the cash leaves the company, and the share price typically falls by about the dividend amount on the ex-dividend date. Over long periods, however, reinvested dividends have made up a large part of the total return from shares. Dividends from foreign companies may have withholding tax deducted at source, and tax treatment varies widely between countries and account types.