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 Iowa, 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 Iowa law, a corporation may pay dividends to its shareholders out of its net profits or from its surplus funds if the payment does not render the corporation insolvent. The board of directors of a company has the discretion to decide if a dividend will be paid, to which class of shareholders, and in what form—whether cash or stock. Dividends can be issued on a regular basis, such as quarterly or annually, or as a special, one-time distribution. The decision to retain earnings rather than distribute them as dividends contributes to the company's retained earnings, which may be used for business reinvestment or other corporate purposes. It's important for corporations to comply with the relevant statutes to ensure that dividend distributions do not adversely affect the company's financial stability or violate the rights of any shareholders.