Dividend limitation

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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.
References in periodicals archive ?
Customary covenants apply to the term loan, including maximum total leverage, interest coverage, capital expenditure limits, stock repurchase and dividend limitations and standard restrictions on investments and mergers and acquisitions.
Fitch believes that maintaining assets at the holding company is prudent given the restrictive dividend limitations for insurance companies.
Fitch believes that maintaining assets at the holding company is prudent given the more restrictive dividend limitations for New York-domiciled companies.