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2.1.3 Definition and type of dividends
2.1.3.1 Definition of dividend
Dividend is an instrument to pay investors for their contributions
towards company. Stice & Stice (2012) presented that dividend is a
profit sharing for shareholders in accordance with the total numbers of
shares held.
Dividend is a cash flow that set aside for shareholders, while
retained earnings is one of the most important source of funding for the
company financing growth (Horne & Wachowicz, 1998).
In essence, dividend is defined as a partial return of investment
that shareholders gain from company’s profit.
2.1.3.2 Type of dividends
There are a few types of dividend (Ross, Westerfield & Jordan, 2012) :
Cash dividends
Cash dividend is a form of distribution to shareholders. Before
it is paid to the common shareholders, every preferences of
preferred dividend is obliged to be paid to the preferred
shareholders.
Property dividends
Dividends payable in assets of the corporation other than cash
( non-cash ) are called property dividends. Property could be in
form of marketable securities owned by other companies, such
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