Types of Dividends

A cash dividend is a dividend paid for in cash. To be able to pay dividends in cash, companies not only need to have enough profits, but to have enough cash. Even when the company shows large profits retained in its balance sheet this is not enough to assure cash dividends. The amount of money that a company has is independent to profits retained in their possession.

Cash-poor companies still can be profitable. Most American companies pay cash dividends regularly. Each trimester or semester or annually.

The pharmaceutical company Johnson & Johnson pays dividends every three months, and McDonald?s pays them annually. A company could declare extra dividends additional to their regular dividend payments. An extra dividend is an additional non-recurring dividend paid over and above the regular dividends by the company.

Microsoft Corporation paid in November 15, 2004 a $2 extra dividend per share and above its regular dividend to shareholders of record holding the stock on this date.

Companies with fluctuating earnings pay out additional dividends when their earnings warrant it, rather than fighting to keep a higher quantity of regular dividends. General Motors, for example, would declare extra dividends whenever times were good for the automobile industry.