What are some characteristics associated with dividends paid on common stock?

Expert Solution

Dividend is the amount of net profit that is distributed to the shareholders of a company. A company may declare its entire profit as dividend or it may retain some portion of profit as retained earnings. Dividend paying stocks are generally considered to be more valuable investments than non dividend paying stocks.

The dividend can be either common stock dividend or preferred stock dividend. A common stock dividend is the dividend paid on common stock ( to Equity shareholders) from the profits of the company. Like other dividends, common stock dividend is payout in the form of either cash or stock. Common stock holders can receive unlimited dividend payments if the firm is highly profitable. And further common stock holders have no special or guranteed dividend rights. The payment and size of dividends are determined by the Borad of Directors of the company elected by the common stock holders.

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