Liquidating Dividend

What is a '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.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Capital Dividend

    A type of payment by a firm to its investors that is drawn from ...
  3. Capital Dividend Account - CDA

    A special corporate tax account which gives shareholders designated ...
  4. Stock Dividend

    A dividend payment made in the form of additional shares, rather ...
  5. Constructive Dividend

    A concept in U.S. taxation in which various distributions to ...
  6. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
Related Articles
  1. Investing

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  2. Markets

    Which Is Best: Cash Dividend Or Stock Dividend?

    Cash dividends are paid to shareholders when a company decides not to use the money for operations, but instead, transfer economic value to its shareholders.
  3. Investing

    How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  4. Investing

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.
  5. Markets

    4 Reasons a Company Might Suspend Its Dividend

    Learn about the four most common reasons a company may choose to suspends its dividends, including financial trouble, funding growth and unexpected expenses.
  6. Markets

    How Dividends Affect Stock Prices

    Find out how dividends affect the price of the underlying stock, the role of market psychology and how to predict price changes after dividend declaration.
  7. Investing

    The Truth About Dividends

    Dividends may seem like money for nothing, but they have several implications.
  8. Managing Wealth

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
  9. Investing

    3 Dividend Trends in the S&P 500 Index (TSN, LUV)

    Analyzing recent financial performance of companies demonstrating an inclination to issue consistent dividends to shareholders on a quarterly basis.
  10. ETFs & Mutual Funds

    Understanding Taxes on Mutual Funds Dividends

    Learn about the basics of mutual fund dividend taxation, including how and why mutual funds pay dividends and when different tax rates apply to dividend income.
RELATED FAQS
  1. How do dividends affect retained earnings?

    Find out how distribution of dividends affects a company's retained earnings, including the difference between cash dividends ... Read Answer >>
  2. Can I receive dividends on ordinary shares of a company?

    Understand the basics of collecting dividend payments on ordinary shares, including when dividends can be paid and under ... Read Answer >>
  3. Which is better a cash dividend or a stock dividend?

    The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: ... Read Answer >>
  4. Are dividends considered an expense?

    Learn how dividends are accounted for and why cash or stock dividends on common or preferred shares are not considered an ... Read Answer >>
  5. Are dividends considered an asset?

    Find out why dividends are considered an asset for investors but a liability for the company that issued the stock, and learn ... Read Answer >>
  6. If I reinvest my dividends, are they still taxable?

    Take a brief look at how the Internal Revenue Service taxes different kinds of dividends, including taxation on dividends ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center