A
dividend is a payment made by a
corporation to its
shareholders, usually as a distribution of
profits. When a corporation earns a profit or surplus, it can re-invest it in the business (called
retained earnings), and pay a fraction of this reinvestment as a dividend to shareholders. Distribution to shareholders can be in cash (usually a deposit into a bank account) or, if the corporation has a
dividend reinvestment plan, the amount can be paid by the issue of further shares or
share repurchase.