Business Dividends in an Economic Crisis

In this video we consider whether big businesses should continue to pay dividends to shareholders during the economic crisis caused by COVID-19.

BACKGROUND INFORMATION ABOUT DIVIDENDS

A dividend is a cash payment out of a business. It arises from a decision made by management - should profits be returned to shareholders, or retained in the business.

It is made from the accumulated profits earned by a company to shareholders.

A dividend can only be paid if the company has sufficient reserves of profit. Quoted public companies usually split the annual dividend into two payments – the "interim" (paid after six months trading) and the "final" (paid at the end of the financial year).

The decision about the value of a dividend and whether to pay it at all has potentially significant implications for a business wanting to maximise its cash resources and improve its liquidity position.