Liquidating dividend
Principles of Finance glossary · Principles Of Finance
Definition
A dividend representing a return of capital rather than distribution of earnings; typically reduces paid-in capital.
Liquidating dividend in plain English
Normally a dividend is a company sharing out its profits, like a slice of the pie it just baked. A liquidating dividend is different: it's handing back the money investors originally put in, rather than paying them from earnings, so it's really a 'return of your own capital.' Picture a lemonade stand that isn't making much profit, so it gives you back part of the cash you invested to start it. It usually shows up as a reduction in 'paid-in capital' (the pool of money owners contributed), and it often signals the business is shrinking or winding down.
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