Over 700 finance terms, Shmooped to perfection.
The “thrown off” value from common equity. It’s not the same as interest on a bond, which is a fixed percentage and non-discretionary. Dividends are discretionary and the company must decide from quarter to quarter whether or not pay one. There are a lot of reasons why companies want to be consistent in their dividend policies, but just know that a dividend on common stock is not a legal requirement. The middle of the fairway definition of a dividend is rooted in equity investments in stocks. Heinz ketchup, ticker: HNZ, pays a $1.92 dividend per year. It is a roughly $50 stock. It’s “dividend yield” is $1.92 / $50 which is 3.84%.