Liquidating Dividend

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DEFINITION of 'Liquidating Dividend'

A type of payment made by a corporation to its shareholders during its partial or full liquidation. For the most part, such a distribution is made from the company's capital base, and as a return of capital, is typically not taxable for shareholders. This distinguishes a liquidating dividend from regular dividends, which are issued from the company's operating profits or retained earnings.


Also called liquidating distribution.

BREAKING DOWN 'Liquidating Dividend'

A liquidating dividend may be made in one or more installments. In the U.S., a corporation paying out liquidating dividends will issue to its shareholders a Form 1099-DIV showing the amount of the distribution.


Despite the tax advantages, investors who receive liquidation dividends often find that they do not cover their initial investment.

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RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
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    According to data published by the NYU Leonard N. Stern School of Business, as of January 2015, the average annual dividend ... Read Full Answer >>
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