when a corporation declares a dividend it debits its retained earnings and credits a liability account called dividend payable on the date of payment the company reverses the dividend payable with a debit entry and credits its cash account for the respective cash outflow 
cash dividends do not affect a company s income statement however they shrink a company s shareholders equity and cash balance by the same amount firms must report any cash dividend as payments in the financing activity section of their cash flow statement the easiest way to compare cash dividends across companies is to look at the trailing 12 month ttm dividend yields which are computed as a company s dividends per share for the most recent 12 month period divided by its current stock price this computation standardizes the measure of cash dividends concerning the price of a common share cash dividend examplenike is a rather mature firm that pays quarterly cash dividends in february 2022 the sportswear brand announced a 0 305 per share quarterly cash dividend payable apr 1 2022 1 for fiscal year 2021 the company saw year over year yoy increased revenues of 19 3 meanwhile earnings per share eps rose 123 2