dividend

While a sale of corporate assets to stockholders is, in a literal sense, a distribution of its property, such a transaction does not necessarily fall within the statutory definition of a dividend. For a sale to stockholders may not result in any diminution of its net worth and in that case cannot result in any distribution of its profits. To transfer it from the one category to the other, it is at least necessary to make some showing that the transaction is in purpose or effect used as an implement for the distribution of corporate earnings to stockholders.

A portion of the principal or profits divided among several owners of a thing. The term is usually applied to the division of the profits arising out of bank or other stodts, or to the division among the creditors of the effects of an insolvent estate.

In another sense, according to some old authorities, it signifies one part of an indenture. A corporate profit set aside, declared and ordered by the directors to be paid to the stockholders on demand or at a fixed time. 20S 111. 818. A cash dividend is a disbursement to the stockholder of accumulated earnings, and dend involves no disbursement by the corporation. It parts with nothing, and the stockholder receives merely certificates of stock which evidence, with his former shares, his interest in the entire capital. Stock dividends represent an addition from accrued earnings to the capital of the company; but they do not represent income, but merely additions to the source of income. Hale, Private Corporations, 227.

A fund to be divided. The share allotted to each of several persons entitled to share in a division of profits or property. Thus, dividend may denote a fund set apart by a corporation out of its profits, to be apportioned among the shareholders or the proportional amount faliing to each. In bankruptcy or insolvency practice, a dividend is a proportional payment to the creditors out of the insolvent estate. State v. Comptroller of State, 54 N. J. Law, 135, 23 Atl. 122; Trustees of University v. North Carolina R. Co., 76 N. O. 103, 22 Am. Rep. 671; De Koven v. Alsop, 205 Ili. 309, 68 N. E. 930, 63 In R. A. 587; Hyatt v. Allen, 56 N. Y. 553, 15 Am. Rep. 449; Cary v. Savings Union, 22 Wall. 38, 22 L. Ed. 779; In re Ft. Wayne Electric Co.rp. (D. C.) 94 Fed. 109; In re Fielding (D. Ct) 96 Fed. 800.

In old English law. The term denotes one part of an indenture, (q. v.)

— Preferred dividend. One paid on the preferred stock of a corporation ; a dividend paid to one class of shareholders in priority to that paid to another. Chaffee v. Railroad Co., 55 Vt 129; Taft v. Railroad Co., 8 R. I. 310, 5 Am. Rep. 575.

— Scrip dividend. One paid in scrip, or in certificates of the ownership of a corresponding amount of capital stock of the companv thereafter to be issued. Bailey v. Rnilroad Co.., 22 Wall. 604, 22 In Ed. 840.

— Stock dividend. One paid in stock, that is, not in money, but in a proportional number of shares of the capital stock of the company, which is ordinarily increased for this purpose to & corresponding extent Kaufman v. Charlottesville Woolen Mills Co., 93 Va. 673, 25 S. El 1003; Thomas v. Gregg, 78 Md. 545, 28 Atl. 565. 44 Am. St Rep. 310

— Ex dividend. A phrase vised by stock brokers, meaning that a sale of corporate stock does not carry with it the seller's right to receive his proportionate share of a dividend already declared and shortly payable.

A fund to be divided. The share allotted to each of several persons entitied to share in a division of profits or property. Thus, dividend may denote a fund set apart by a corporation out of its profits, to be apportioned among the shareholders, or the proportional amount falling to each. In banukraptey or insolveney prac- Lace tice, a dividend is a proportional payment to the creditors out of the insolvent estate.

In old English law. The term denotes one part of an indenture, (gq. 2.)

A portion of the princial or the profits of a thing divided among s several owners.* 1. In bankruptcy and insolvency law, asits apportioned among creditors. 2. In the administration of the estates of ecedents, a distributive share.' See Equal. 3. A distribution of the funds of a corpoition among its members, pursuant to a ote of the directors or managers.i^ Corporate funds derived from the business lid earnings of a corporation, appropriated y a corporate act to the use of, and to be ivided among, the stockholders.' Referring to a corporation engaged in busi- Bss, and not being closed up and dissolved, — fund which the corporation sets apart > See 4 Bl. Com..54; State v. Oskins, 38 Ind. 364 (1867),,ses; Wall v. Lee, 34 N. Y. 141 C1865), cases. ' [3 Bl. Com. 236. ' L. diversus, different. ' Commonwealth v. Butts, 134 Mass. 453 (1878), cases. » [Parker v. Griswold, 17 Conn. *399 (1845). ■ [Commonwealth v. Erie, &c. R. Co., 10 Phila. 466 173). ' University v. North Carolina R. Co., 76 N. C. 105 177). 'Williston V. Michigan, &c. E. Co., 13 Allen, 404 i66). ' [Hyatt V. Allen, 56 N. Y. 556 (1874), Andrews, J.; laffee v. Rutland R. Co., 55 Vt. 139 (1883); Pierce, from its profits to bo divided among its members.! The dividends declared by a corporation in business are, and, except under special circumstances, always tehould be, from profits. Hence, the word frequently carries with it the idea of a division of profits; but that is not necessarily its only meaning. Its special signification, in a particular case, Is dependent upon the character of the thing divided." Does not necessarily imply aproraiadistribution.a Preferred dividend. A dividend paid to one class of shareholders in priority to that to be paid to another class.* Preferential dividend. A preference to a limited extent in the division of the sum to be divided.5 Dividends on preferred stock are payable only out of net earnings applicable thereto: they are not payable absolutely and unconditionally, as is interest. Until declared, the right to a dividend is not a debt; and the obligation to declare it does not arise until there is a fund from which it can properly be made. When to declare a dividrind, and the amount thereof, is, ordinarily, a matter of internal management. Unless it appears that somebody in particular will be injured, a court of equity will not interfere.' A dividend declared out of earnings is not an asset of the company, but belongs to the shareholder. The corporation holds it as his trustee. Before the dividend is declared, each share of stock represents the owner's whole interest; when he transfers the share, he transfers his entire right; hence, a dividend subsequently declared belongs to the new holder." A stock dividend does not diminish or interfere with the property of a corporation. It simply dilutes the shares as they existed before. The corporation is just as capable of meeting demands upon it; the aggregate of the stockholders own the same interest they had previously. When stock has been lawfully created, a dividend may be made, provided the stock represents property. There is no statute in New York which requires dividends to be made in cash; and there is no rule or policy of law which condenms a property dividend. The stockholders can take the property divided to them and sell it for cash. But a dividend payable in cash, or payable generally, makes the corporation a debtor. ^ See Ex, 3; Stock, 3 (3), Preferred. 1 Lockhart v. Van Alstyne, 31 Mich. 79 (1875), Cooley, J.; 108 U.S. 899. 'Eyster v. Centennial Board, 94 U. S. 504 (1876), Waite, C. J. See Gary v. Savings Union, 23 Wall. 41 (1874); 18 Barb. 667; 8 R. I. 333; 1 De G. & J. •630-37. s Hall«. Kellogg, 13 N. Y. 335 (1855). « Tatt V. Hartford, &c. B. Co., 8 R. 1. 333 (1866), Bradley, C. J. See55Vt. 129, m/ra. » See Henry t>. Great Northern Ey. Co., 1 De Gex & J. *mn (1857). « Chaffee v. Rutland R. Co., 55 Vt. 126, 137, 133 (1883), cases, ' Jermain v. Lake Shore, &c. R. Co., 91 N. Y. 493 (1883).