What does 'dividend' mean?

The term 'dividend' specifically refers to a portion of a company's earnings that is distributed to its shareholders. This distribution occurs after the company has generated profits and has decided to share a part of those profits with its owners, who are the shareholders. Dividends can be issued in the form of cash payments or additional shares of stock and serve as a reward for investing in the company.

Understanding dividends is important for investors, as they are often a significant aspect of total return on investment, in addition to capital gains from selling shares. Dividends reflect a company's financial health and its ability to generate sufficient earnings to reward shareholders, which can also influence the stock price and investor sentiment towards the company.

Other options reflect different financial concepts that do not relate directly to the distribution of profits to shareholders. For instance, a tax on corporate profits is unrelated to dividend payments, as it pertains to obligations to the government rather than to shareholders. Similarly, fees for using company resources and performance-based bonuses for employees are internal financial transactions that do not involve dividends or shareholders directly. Thus, the focus of 'dividend' is solely on the distribution of earnings to a company's owners.