What does "cutting a melon" mean?

By Chizoba Morah AAA
A:

In finance, the word "melon" is typically used to refer to a company's earnings. "Cutting a melon", therefore, is a term used to describe a situation in which a company's managers declare a large cash dividend or extra stock equity. Usually, management shares a company's earnings by issuing dividend payments. It is up to the company's board of directors to determine how company earnings will be shared with investors in the form of dividends, but this is often done according to a preset policy and on a specific time line. When a company's earnings grow, or the melon gets bigger, it might issue extra stock or special dividends in addition to regular dividends. In other words, the company cuts the melon and shares it with investors.



For more on a company's distributions, check out Dividend Facts You May Not Know.



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