Short definition: Dividends are payments made by a company to its shareholders out of its profits or reserves.
Explanation: They are a way for companies to distribute a portion of their earnings to their shareholders as a reward for their investment. Dividends can be paid in cash or additional shares of stock.
Example: A company might announce a quarterly dividend of $0.50 per share, meaning that each shareholder would receive 50 cents for every share they own.
Additional information (optional): Dividends are not mandatory, and companies can choose whether or not to pay them, as well as how much to pay. The decision to pay dividends is typically made by the company’s board of directors and is based on factors such as the company’s profitability, cash flow, and growth prospects.