Finance glossary
Dividend
Also known as: Dividends
In simple terms
A dividend is a share of a company’s profits paid out to the people who own its shares. If you hold shares in a company that pays dividends, you get a small cash payment for each share you own.
On this page
What does dividend mean?
A dividend is money a company chooses to return to its shareholders out of its profits. Not every company pays one — some reinvest all their profits to grow instead — and a dividend is never guaranteed, even from a company that has paid them for years.
Dividends are usually quoted as an amount per share, and the “dividend yield” expresses that payment as a percentage of the share price, so you can compare the income from different shares.
How dividends work
The company’s board decides whether to declare a dividend and how much. If you own the shares on the qualifying date, you receive the payment, either as cash or — if you choose — reinvested into more shares.
A high yield can look attractive, but it may simply reflect a falling share price, and boards can cut or cancel dividends at any time if profits fall. Dividends are income on top of any change in the share price itself, which can go down as well as up.
How could this affect me?
For investors who want an income — for example in retirement — dividends can provide a regular stream of cash without selling the underlying shares. Reinvesting them instead can meaningfully boost long-term returns through compounding.
Dividend income may be taxable above the annual dividend allowance, though dividends received inside a Stocks and Shares ISA or a pension are sheltered from that tax.
Things to watch out for
- Dividends are never guaranteed — a company can cut or scrap them if profits fall.
- A very high yield can be a warning sign of a falling share price, not a bargain.
- The share price itself can fall in value, so income does not mean your capital is safe.
- Past dividends are not a reliable guide to what a company will pay in future.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- MoneyHelper, How investing works — shares and dividends (opens in a new tab). Accessed 22 Aug 2026.
- GOV.UK, Tax on dividends (opens in a new tab). Accessed 22 Aug 2026.