Dividend
A distribution of company earnings to shareholders, paid in cash, additional shares, or property.
The exam loves the four-date timeline: declaration, ex-dividend, record, and payment. The high-yield tell is that whoever owns the share before the ex-date receives the dividend; buy on the ex-date or later and the seller keeps it. Under the current T+1 settlement standard (U.S. since May 2024), the ex-date now coincides with the record date — so older question banks placing the ex-date one business day before record reflect the retired T+2 convention. Expect a question asking which date the price drop occurs on (the ex-date) versus which determines eligibility (record).
Don’t confuse a stock dividend with a cash dividend: a stock dividend (or split) changes nothing about total wealth, equity, or market cap—it merely lowers price proportionally, so EPS falls but P/E is unchanged. The classic trap is treating dividends and a repurchase as different in value; pre-tax, all-else-equal payouts of equal size leave a shareholder equally well off (the dividend-displacement idea). And never equate a high yield with a generous payout—yield rises when price falls.
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