A dividend is a share of a company’s profits that is paid to shareholders, generally as a cash payment, but also sometimes in shares.

The payment of a dividend, and the level of any payment, is proposed by the company’s board of directors and approved by shareholders. Some profits will generally be reinvested into the company to provide capital for future growth; in companies seeking fast growth or just starting out, there may not be a dividend at all as all profits are reinvested.

Investment funds with an income focus may invest heavily in companies which have a good track record of paying dividends.