DEFINITION of 'Dividend Clawback'

An arrangement under which those financing a project agree to contribute, as equity, any prior dividends received from the project to cover any cash shortages.

BREAKING DOWN 'Dividend Clawback'

When there is no cash shortfall, those investors who provided funding are able to keep their dividends. A dividend clawback arrangement provides incentive for a project to remain on budget so that investors do not have to return dividends received prior to a cost overrun.

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