Dividend Clawback

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DEFINITION

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.

INVESTOPEDIA EXPLAINS

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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