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The board of directors authorizes a payout or distribution of cash to its stockholders. It is commonly referred as a dividend. The statement is true.
A dividend is a payment made to shareholders in exchange for their investment in a company's stock, and it is generally derived from the company's net earnings. Though profits can be maintained by the firm and utilized for continuing and future business operations, the balance can be distributed to shareholders as a dividend.
Companies may continue to pay dividends even if their profits are insufficient to sustain their established track record of payouts. The board of directors has the authority to declare dividends over a variety of time periods and at varied payout rates.
Dividends can be paid at regular intervals such as monthly, quarterly, or yearly. Walmart Inc. (WMT) and Unilever (UL), for example, pay quarterly dividends.
Dividend payments have an influence on share price, and the price may climb by roughly the amount of the dividend paid on the announcement, only to decrease by a corresponding amount at the opening session of the ex-dividend day.
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