High Dividend Stocks - Key Definitions for Dividend Investors
DIVIDEND
Mutual fund dividends are paid out of income, usually on a quarterly basis from the fund's investments. The tax on such dividends depends on whether the distributions resulted from capital gains, interest income, or dividends received by the fund
DIVIDEND YIELD
DIVIDEND PAYOUT RATIO
EX-DIVIDEND interval between the announcement and the payment of the next dividend. An investor who buys shares during that interval is not entitled to the dividend. Typically, a stock's price moves up by the dollar amount of the dividend as the ex-dividend date approaches, then falls by the amount of the dividend after that date. A stock that has gone ex-dividend is marked with an
EX-DIVIDEND DATE date on which a stock goes EX-DIVIDEND, typically about three weeks before the dividend is paid to shareholders of record. Shares listed on the New York Stock Exchange go ex-dividend four business days before the RECORD DATE. This NYSE rule is generally followed by other exchanges.
RECORD DATE see DATE OF RECORD; EX-DIVIDEND DATE; PAYMENT DATE.
DATE OF RECORD date on which a shareholder must officially own shares in order to be entitled to a dividend. For example, the board of directors of a corporation might declare a dividend on November 1 payable on December 1 to stockholders of record on November 15. After the date of record the stock is said to be EX-DIVIDEND. Also called record date.
PAYMENT DATE date on which a declared stock dividend or a bond interest payment is scheduled to be paid.
PAYOUT RATIO percentage of a firm's profits that is paid out to shareholders in the form of dividends. Young, fast-growing companies reinvest most of their earnings in their business and usually do not pay dividends. Regulated electric, gas, and telephone utility companies have historically paid out of larger proportions of their highly dependable earnings in dividends than have other industrial corporations. Since these utilities are limited to a specified return on assets and are thus not able to generate from internal operations the cash flow needed for expansion, they pay large dividend to keep their stock attractive to investors desiring yield and are able to finance growth through new securities offering. See also RETENTION RATE.
RETENTION RATE percentage of after-tax profits credited to retained earnings. It is the opposite of the DIVIDEND PAYOUT RATIO.
Source: Barron's Dictionary of Finance and Investment Terms fifth edition
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