Dividend - A payment given to a company's shareholder, out of the company's current or retained earnings. Companies are not required to pay dividends, but if the company wants to transfer money to its shareholders it has to be done in this way.

Ordinary dividends are taxed at the regular rates of the taxpayer. If certain conditions are met some types of dividends are considered qualified dividends and are taxed at the same rate as Capital Gains.

Publicly traded companies that offer dividends are most often companies that are not in a rapid growth phase and no longer benefit by reinvesting their profits.

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