of securities. Divestiture A complete asset or investment disposal such as outright sale or liquidation. Dividend A portion of a company'sprofit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a shareyields the investor 5%. Dividend Discount Return The rate of return which equates the present value of future expected dividends with the current market price of a security. Dividend in arrears Accumulated dividends on cumulative preferred stock that are deemed payable to the current holder. Dividend capture See: Dividend rollover plan Dividend clawback An arrangement under which sponsors of a project agree to contribute as equity any prior dividends received from the project to the extent necessary to cover any cash deficiencies. Dividend clientele A group of shareholders who prefer that the firm follow a particular dividend policy. Such a preference may be based on comparable tax situations. Dividend Disbursing Agent A commercial bank or financial_institution that disburses dividend to the securityholders. Usually a Transfer Agent is also the Dividend Disbursing Agent. Dividend Discount Model (DDM) A method to value the common stock of a company that is based on the present value of the expected future dividends. Dividend distribution See: Dividend income Dividend growth model An approach that assumes dividends grow at a constant rate in perpetuity. The value of the stock equals next year's dividends divided by the difference between the required rate of return and the assumed constant growth rate in dividends. Dividend income Distribution of earnings to shareholders that may be in the form of cash, stock, or property. Mutual fund dividends are paid out of income, usually on a quarterly basis, from interest generated by a fund's investments. Also known as a dividend distribution. Dividend limitation A bond convenant that restricts in some way the firm's ability to pay cash dividends. Dividend Order A letter or form signed by the shareholder instructing a corporation to issue and forward dividend and/or interest payments to a specific person or entity other than the registered owner, such as a bank or broker. Dividend payout ratio Percentage of earnings paid out as dividends. Dividend policy Standards by which a firm determines the amount of money it will pay as dividends. Dividend rate The fixed or floating rate paid on preferred stock based on par value. Dividend record S&P publication stating companies' payment histories and corporate policies. Dividend Reinvestment Plan (DRP) Plan which provides for automatic reinvestment of shareholderdividends in more shares of a company'sstock, often without commissions. Some plans provide for the purchase of additional shares at a discount to marketprice. Dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder. Dividend requirement The annual earnings minimum required for payment of dividends on a preferred stock. Dividend rights A shareholder's rights to receive per-share dividends identical to those other shareholders receive. Dividend rollover plan An investment strategy that entails the purchasing before and selling after of a stock right before its