Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.

Similar financial terms

Self-liquidating loan
Loan to finance current assets, The sale of the current assets provides the cash to repay the loan.

Cum dividend
Phrase used to indicate that a stock is selling with a recently declared right or dividend.

Ex dividend
Phrase used to indicate that a stock is selling without a recently declared right or dividend. The ex-rights or ex-dividend date is generally four business days before the date of record

Payment made by a firm to its owners, either in cash or in stock. Also referred to as the income component of the return on an investment in stock.

Dividend payout ratio
A ratio showing the percentage of net profits paid out in dividends on common stock, after reducing net profits by the amount of dividends paid on preferred stock.

Dividend yield
A stock's daily percentage summary of yield, calculated by dividing annual dividend per share by the day's closing stock price.

Traditional view (of dividend policy)
An argument that "within reason," investors prefer large dividends to smaller dividends because the dividend is sure but future capital gains are uncertain.

Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Stock dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.

Special dividend
Also referred to as an extra dividend. Dividend that is unlikely to be repeated.

Signaling view (on dividend policy)
The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.

Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable.

Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital market environment, that shows the irrelevance of dividend policy in a perfect capital market.

Cash dividend
A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend.

Cumulative dividend feature
A requirement that any missed preferred or preference stock dividends be paid in full before any common dividend payment is made.

Final dividend
The dividend that is paid at the end of the financial year as the final amount of profit has been published, under deduction of the interim dividend which was already paid out.

Extra Dividend
A payment declared or paid by a corporation in addition to its ordinary dividend policy. It can reflect a distribution of profits which are considered extraordinary.

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Perfect market view (of capital structure)

Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market.

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