Dividend limitation

(redirected from Dividend Limitations)

Dividend limitation

A bond convenant that restricts in some way the firm's ability to pay cash dividends.

Dividend Limitation

A provision in some bond indentures placing a maximum amount on what a company can pay out in dividends. A dividend limitation reduces the risk that the issuer will default on a bond because it foolishly decides to pay out too much in dividends to common shareholders. This provision is designed to protect bondholders but has the possibility to scare away potential stockholders.