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Corporations may pay part of their earnings as dividends to you and other shareholders as a return on your investment. These dividends, which are often declared quarterly, are usually in the form of cash, but may be paid as additional shares or scrip.
You may be able to reinvest cash dividends automatically to buy additional shares if the corporation offers a dividend reinvestment program (DRIP).
Dividends are taxable unless you own the investment through a tax-deferred account, such as an employer sponsored retirement plan or individual retirement account. That applies whether you reinvest them or not.
However, dividends on most US and many international stocks are considered qualifying dividends. That means you owe tax at your long-term capital gains rate, provided you have owned the stocks the required length of time.
Dividends on real estate investment trusts (REITs), mutual savings banks, and certain other investments aren't considered qualifying and are taxed at your regular rate.
dividenda payment made by a JOINT-STOCK COMPANY to its SHAREHOLDERS for providing SHARE CAPITAL. Dividends are a distribution of the after-tax PROFITS of the company, and are paid in proportion to the number of shares held. Generally the directors of a company will decide to pay out only a proportion of after-tax profit as dividends, reinvesting the remaining profits in the business (see RETAINED PROFIT).
The DIRECTORS may pay an interim dividend during the accounting period then recommend a final rate of dividend per share for approval by shareholders at the ANNUAL GENERAL MEETING, this final dividend being paid after the AGM. In the UK dividends are paid net of income tax, though shareholders receive a tax credit for the amount of tax deducted by the company from their dividends, which must be added to the net dividends received to establish the shareholder's gross taxable dividend income (see CORPORATION TAX).