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 California, dividends are regulated under both state and federal law. Under California Corporations Code, a company's board of directors has the discretion to declare dividends out of the corporation's net profits or retained earnings, subject to certain restrictions. The board may choose to distribute dividends to all shareholders or specific classes of shareholders, and the dividends can be paid in cash or in the form of additional stock. The payment of dividends must comply with the terms of the corporation's articles of incorporation and any applicable shareholder agreements. Additionally, the payment of dividends must not render the corporation insolvent. At the federal level, dividends are subject to taxation, and companies must adhere to IRS regulations regarding the reporting and withholding of taxes on dividend payments. The frequency of dividend payments is typically determined by the company's board of directors and can be issued regularly or as a special, one-time distribution.