A:

In finance, the word "melon" is typically used to refer to a company's earnings. "Cutting a melon", therefore, is a term used to describe a situation in which a company's managers declare a large cash dividend or extra stock equity. Usually, management shares a company's earnings by issuing dividend payments. It is up to the company's board of directors to determine how company earnings will be shared with investors in the form of dividends, but this is often done according to a preset policy and on a specific time line. When a company's earnings grow, or the melon gets bigger, it might issue extra stock or special dividends in addition to regular dividends. In other words, the company cuts the melon and shares it with investors.

For more on a company's distributions, check out Dividend Facts You May Not Know.

RELATED FAQS
  1. Can dividends be paid out monthly?

    Find out if stocks can pay dividends monthly, and learn about the types of companies most likely to do so and how monthly ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ... Read Answer >>
  5. Can a Company Declare a Dividend that Exceeds Earnings Per Share?

    Many well-known Fortune 500 companies have paid dividends in years where they posted negative earnings per share. Read Answer >>
  6. How are dividends usually paid out?

    Discover the two compensation methods commonly used by companies and mutual funds to make dividend payments on equity investments. Read Answer >>
Related Articles
  1. Investing

    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.
  2. Investing

    Due Diligence On Dividends

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

    AAPL: Apple Dividend Analysis

    Apple's dividend has had healthy growth ever since its 2012 reinstatement, thanks to Apple's continuously rising revenue, earnings and operating cash flow.
  4. Investing

    The Top 5 Dividend Paying Oil Stocks for 2016

    Discover the top five dividend-paying oil companies for 2016 and what factors contribute to their ability to continue dividend payments.
  5. Investing

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  6. Investing

    Don't Take Dividends For Granted

    Companies have been paying dividends to their shareholders since the 1600s and have given investors good reason to hold onto their shares for long time periods. For many investors, dividends ...
  7. Investing

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
RELATED TERMS
  1. Dividend

    A dividend is a distribution of a portion of a company's earnings, ...
  2. Cash Dividend

    Money paid to stockholders, normally out of the corporation's ...
  3. Dividend Rate

    The total expected dividend payments from an investment, fund ...
  4. Stock Dividend

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

    A financial ratio that shows how much a company pays out in dividends ...
  6. Indicated Yield

    The dividend yield that a share of stock would return based on ...
Hot Definitions
  1. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  2. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  3. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  4. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
  5. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
  6. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
Trading Center