In mutual funds, a dividend distributed to shareholders that comes from the dividends or interest on the stocks or bonds represented in the mutual fund. It does not include income from the capital appreciation of the mutual funds. Income dividends are taxed as ordinary income at each shareholder's marginal tax bracket; they are not taxed as capital gains. See also: Capital gains distribution.
A distribution of dividends, interest, and short-term capital gains by an investment company to its shareholders. This type of dividend is taxed at the recipient's marginal rate. See also capital gains distribution.