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 Tennessee, as in other states, the distribution of dividends is governed by state statutes and the company's own articles of incorporation and bylaws. Under Tennessee law, specifically the Tennessee Business Corporation Act, a corporation's board of directors may authorize and the corporation may pay dividends on its shares subject to any restrictions in the articles of incorporation. The decision to pay dividends, whether in cash or in the form of additional stock, and the scheduling of such payments, are at the discretion of the board of directors. The board must ensure that the payment of dividends does not render the corporation insolvent or unable to pay its debts as they become due. Retained earnings are the portion of net profits that are not distributed as dividends and are kept by the company to reinvest in its business or to pay debt. It is important for shareholders to understand that dividend policies can vary widely from one company to another, and they should refer to the specific corporation's governing documents and state law for guidance on how dividends are handled.