how a cash dividend works
cash dividends are a common way for companies to return capital to their shareholders in the form of periodic cash payments typically quarterly but some stocks may pay these bonuses on a monthly annual or semiannual basis while many firms pay regular dividends there are special cash dividends that are distributed to shareholders after certain nonrecurring events such as legal settlements or the borrowing of money for large one time cash distributions each company establishes its dividend policy and periodically assesses if a dividend cut or an increase is warranted cash dividends are paid on a per share basis the timing of cash dividendsa company s board of directors announces a cash dividend on a declaration date which entails paying a certain amount of money per common share after that notification the record date is established which is the date on which a firm determines its shareholders on record who are eligible to receive the payment in addition stock exchanges or other appropriate securities organizations determine an ex dividend date which is typically two business days before the record date an investor who bought common shares before the ex dividend date is entitled to the announced cash dividend investors must report dividend earnings and they are taxable as income for the recipients irs form 1099 div will list the total amount of reportable dividend earnings 