Cash dividend is a type of dividend, which is paid to the shareholders or the owners of the company in cash form or check. Cash dividends are paid out of the profit made by the company. If a company has announced cash dividends and generated funds through the preferred stocks, then it is bound to pay dividends to the shareholders first and then only the common stockholders can be paid.
The dividends are declared at regular intervals. Some companies pay dividends in a quarterly mode and the rest pays in the semi-annual or annual mode. Again there are a few companies that do not pay any type of dividend to the investors. At the same time, there are some companies, which are involved in paying special dividends.
The mutual funds generally provide a year end dividend to the investors.The decisions of paying dividends solely depend on the Board of Directors of the particular company. The Board of Directors are also responsible for making decisions about the type of dividend like cash dividend, property dividend or stock dividend that they want to pay the investors. One important factor related with the cash dividend as well as with each and every form of dividend is the dividend ratio.
The cash dividends are distributed among the investors according to these ratios.
The Board of Directors of the company are also responsible for deciding the ratio of dividend payout.
Distribution of cash dividend follows a certain method. According to this method, the Board of Directors of the particular company announces the dividend and it also sets the record date. To get the advantage of the cash dividend, the investor’s name as a shareholder should be there in the company’s record book before the declared date. After this the ex-dividend date is declared by the stock exchanges.
This process is also followed in distributing the stock and property dividend. Cash dividend is generally preferred by the investors because they get the cash directly.