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Dividends

Payments made by companies to their shareholders are called dividends. When businesses make a profit some of the funds are routinely reinvested and are referred to as retained earnings. The amount of the profit that is paid out to the shareholders is the dividend. The frequency of dividend disbursements to shareholders varies but often the payments are made quarterly in the United States.

The company's board of directors makes the decision to declare a dividend payment. Shareholders cannot introduce shareholder resolutions involving specific dividend amounts.

In the event of a financial loss in any given year, a company may opt to continue its dividend payments taking the amount from the retained earnings or the company may decide to suspend the dividend payment. There are also instances in which a company receives gains from the sale of assets with no plans for reinvestment at which time special dividends may be declared.

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