A dividend is a distribution to some or all shareholders of some portion of a company’s earnings—usually from its net profits. The profits retained by the company (and not paid as dividends) are known as retained earnings.

A company’s board of directors may decide to pay a dividend to one or more classes of shareholders, or to all shareholders. Dividends may be paid as cash or as additional stock. And dividends may be paid at a scheduled frequency or as a special dividend on a nonrecurring basis.

In Alabama, as in other states, the payment of dividends is governed by state corporate law and the specific company's articles of incorporation and bylaws. Under Alabama law, a corporation can distribute dividends to its shareholders out of its surplus (the amount by which the company's assets exceed its liabilities) or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. The board of directors of a company has the discretion to decide whether to pay dividends, the amount of such dividends, and the form in which they will be paid (cash or stock), subject to the company's governing documents and any contractual agreements. Dividends can be regular, based on a set schedule, or special, one-time distributions based on particular circumstances. It's important for companies to comply with these regulations to ensure that dividend distributions do not impair the company's capital or violate any agreements with creditors.