A corporation also may issue preferred shares. These are typically nonvoting shares, and their holders receive a preference over holders of common shares for payment of dividends or liquidations. Some preferred dividends may be carried over into another year, either in whole or in part. See also perferred stock. A dividend is a payment to shareholders, in proportion to their holdings, of current or past earnings or profits, usually on a regular and periodic basis.
Directors determine whether to issue dividends.
A dividend can take the form of cash, property, or additional shares. Shareholders have the right to force payment of a dividend, but they usually succeed only if the directors abused their discretion. Restrictions on the distribution of dividends can be found in the articles of incorporation and in statutes, which seek to ensure that the dividends come out of current and past earnings. Directors who vote for illegal dividends can be held personally liable to the corporation. In addition, a corporation's creditors often will contractually restrict the corporation's power to make distributions.