About the name "dividends"
The name comes from the arithmetic operation of division: if a / b = c then a is the dividend, b the divisor, and c the quotient.
In the United States, credit unions generally use the term "dividends" to refer to interest payments they make to depositors. These are not dividends in the normal sense and are not taxed as such; they are just interest payments. Credit unions call them dividends since, as credit unions are owned by their members, interest payments are effectively payments to owners.
In the United Kingdom, consumer co-operative societies use the term "dividend" for profit-sharing payments to their members. Unlike joint stock company dividends, these payments are made in proportion to a members' spending with the co-operative society, not the number of shares they hold in it.
What are dividends?
Dividends are just like a small reward a company pays you for owning shares of its stock. The company takes a portion of its earnings, which it divides and distributes to shareholders. In general, a company that has a slow growth rate pays high dividends. On the other hand, a company with a high growth rate usually pays no dividends. Historically, large corporations and utility stocks have paid regular dividends. These companies usually have growth rates of less than 10% and slow stock price appreciation but have high cash flow. They can pay dividends to investors attracted to income. In contrast, large corporations such as Google and Cisco have growth rates around 30% and high stock appreciation but do not pay dividends. Instead, they reinvest the earnings into the company in order to make the business grow.
What is dividend policy?
Once a company makes a profit, ...