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.