What is a 'dividend'?

A dividend is defined as a portion of a company’s earnings that is distributed to shareholders, typically in the form of cash or additional shares. This distribution reflects the company's profitability and is a way for companies to share their success with those who have invested in them.

When a company generates profit, it can choose to reinvest that profit back into the business or return some of it to shareholders as dividends. The decision to pay dividends depends on the company's financial health and its management's strategy regarding growth and shareholder value. Companies that regularly pay dividends are often seen as financially stable, and dividends can be a significant factor for investors when they decide to buy or hold shares in a company.

In contrast, other options provided focus on different aspects of business finance; for instance, total income generated by a business refers to overall revenue without relating to shareholder distributions. Costs associated with acquiring new assets and retained profits for reinvestment both pertain to a company's financial management but do not represent the concept of dividends.