DIVIDEND ILA. divide/Was, to be divided, front dirid• r,, to divide). A fund. made up of principal or profits, set apart for 11 I OM.
lion among a number of persons ratably titled thereto: al-o the portion or share of each per.-4.1) 11100..1. In PIACI ie.' the term is not in common use to describe a eomplete fund dis tributed once and for all to the claimants or owners. as in the division of partnership assets or the distribution, upon all accounting, of the assets ill the hands of an executor or adminis trator; but it is rather employed to denote the SUIII available for partial or periodical payments cut of such assets or out of current earnings. In this restricted sense it is entirely appropriate to the portion of the assets of an insolvent, or of a company in process of winding up, which is realized from time to time by the trustee or receiver and distributed among the creditors or shareholders. The most common use of the term however, is to describe those profits or earnings of a corporation or joint-stock company which are set apart for distribution among the members and stockholders.
It will be noticed that such assets and earn ings while yet unappropriated are not dividends. and that it is their formal appropriation to the purpose of distribution which gives them that character. As soon as this has been done, and not before, they are treated by the law as the property of the persons entitled thereto under the terms of the appropriation, and such persons may accordingly demand and recover them as 'money had and received to their use.' As applied to corporations, the term dividend has been defined to be "that portion of the profits and surplus funds of the corporation which has been actually set apart by a valid resolution of the board of directors, or by the shareholders at a corporate meeting, for distribution among the shareholders according to their respective interests. in such a sense as to become segregat ed from the property of the corporation and to become the property of the shareholders dis tributively."
The declaration of dividends is one of the usual powers of directors, and. unless controlled by the charter or by-laws of the corporation, they may usually fix the amount of the divi dend, and the time and place of payment, at their sole discretion, subject only to the obliga tion of good faith with the stockholders. Divi dends cannot usually he declared out of the capital, hut only from the profits: but there is no obligation on the directors to appropriate all or any particular portion of the profits to this purpose, though the contrary has been held in England. It has also been held in England that dividends must be payable in money: hut in the rnited States dividends are often paid in the stock, bonds, or scrip of the corporation. When dividends declared from time to time do not exhaust the profits, the surplus thus aecumu hated may he appropriated in whole or part as an 'extra dividend' or bonus.
As between a person having a limited interest iu eorporate shares. as a life tenant, and the person entitled thereto in the future. the ques tion may arise as to whether dividends earned hut not declared during the ownership of the shares by the former, or dividends declared out of ac•umulated earnings, belong to the former as profits or to the latter as capital. Commonly this is solved by applying the rule. previously laid down, that no one becomes entitled to earn ings until they have been appropriated in the form of a dividend. It is usually held also that extra dividends declared out of surplus earnings shall always he regarded as profits in the same way as those declared out of current earnings. See ('oBconArtox ; DinEcroit: SrocNilowEB; SrocK; DEBENTURE, and the authorities referred to under those titles.