Cash Dividend
Money paid to stockholders, normally out of the corporation's current earnings or accumulated profits. All dividends must be declared by the board of directors, and are taxable income to the recipients.
Investopedia Commentary
Long term investors who want to maximize their gains should consider reinvesting the dividends. Most brokers offer a choice as to whether you wish to reinvest or take cash dividends.
Related Links
How and Why Do Companies Pay Dividends?
Back In Vogue: Dividends
The Importance of Dividends
See also: Cash, Dividend, Stockholders
cash dividend
What are the advantages or disadvantages of investing in firms that pay large cash dividends? Income investors look for corporations that pay consistent, large dividends. Income can be predicted by purchasing one group of stocks that pays dividends quarterly beginning in January, one beginning in February, and one in March. Growth investors or investors in a high tax bracket may not want these stocks. They favor companies that forgo dividends to grow internally. Since dividends on stocks are taxable when paid, highly taxed investors postpone taxes by holding growth stocks and selling for gains later, rather than holding dividend paying stocks. Capital gains taxes may be lower than the ordinary tax rates on dividends.Jeffrey S. Levine, CPA, MST, Alkon & Levine, PC, Newton, MA |