A cash distribution paid by a company to its shareholders from profits — typically expressed as a dividend per share or as a yield relative to the share price.
Deeper Explanation
Graham viewed dividends as one of the most important signals of financial quality — a company that pays a consistent, sustainable dividend is demonstrating that its earnings are real cash rather than accounting constructs. The dividend payout ratio (dividends ÷ earnings) reveals whether the dividend is sustainable. High-yield dividends can be value traps if the payout is unsustainable: a 10% yield may indicate an impending cut rather than genuine generosity. Buffett famously does not pay dividends at Berkshire — he argues that retaining and reinvesting at high ROIC creates more value for shareholders than distributing cash.
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