What is an 'Accrued Dividend'

An accrued dividend is a term referring to balance sheet liability that accounts for dividends on common stock that have been declared but not yet paid to shareholders. Accrued dividends are booked as a current liability from the declaration date and remain as such until the dividend payment date. Accrued dividends and "dividends payable" are sometimes interchanged by companies in name.

Accrued dividends are also synonymous with accumulated dividends, which refer to dividends due to holders of cumulative preferred stock.

BREAKING DOWN 'Accrued Dividend'

When a dividend is declared by a company the accrued dividend (or dividend payable) account is credited and the retained earnings account is debited in the amount of the intended dividend payment.  

There are no accounting rules that mandate a time frame in which the accrued dividend entry should be recorded, though most companies usually book it a few weeks before the payment date. After the dividend is declared, it becomes property of the record-date shareholder and is considered separate from the stock. This separation allows the shareholders to become creditors of the company, due their dividend payment, should a merger or some other corporate action occur.

Where to Find Accrued Dividends

Accrued dividends for common stock do not typically show up as a separate line item under current liabilities on a company's balance sheet. The Walt Disney Company, for example, tucks these dividends payable under "Accounts payable and other accrued liabilities." The amount of the dividend that will be paid in the future is located in the statement of shareholders' equity. Accrued dividends on preferred stock, if any, may be found in the notes to financial statements.

RELATED TERMS
  1. Dividend

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

    A forward dividend yield is an estimation of a year's dividend ...
  3. Accrued Liability

    An accounting term for an expense that a business has incurred ...
  4. Cash Dividend

    Cash dividend is the money paid to stockholders normally as a ...
  5. Dividend Rate

    The dividend rate is the total expected dividend payment from ...
  6. Special Dividend

    A special dividend is a non-recurring distribution of company ...
Related Articles
  1. Investing

    How Dividends Affect Stock Prices

    Find out how dividends affect the underlying stock's price, the role of market psychology, and how to predict price changes after dividend declarations.
  2. 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.
  3. Investing

    Is Dividend Investing a Good Strategy?

    Understanding dividends and how they generate steady income for shareholders will help you become a more informed and successful investor.
  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

    WMT: Wal-Mart Dividend Analysis

    Wal-Mart raised its dividend for the 43rd consecutive year, despite losing over 25% of its market value in 2015, and its dividend remains healthy in 2016.
  6. 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.
  7. Investing

    Dividend ETFs Sought for Solid Revenue Streams

    Dividends can be found with plenty of ETFs, but investors should study up before committing capital.
RELATED FAQS
  1. Can dividends be paid out monthly?

    Find out how stocks can pay dividends monthly and learn about the types of industries or companies that will most likely ... Read Answer >>
  2. How do you record adjustments for accrued revenue?

    Understand what accrued revenue is and what it's used to measure. Learn how an accountant would record an adjustment to accrued ... Read Answer >>
Hot Definitions
  1. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  3. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  4. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  5. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  6. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
Trading Center