What is a dividend?

A dividend is defined as a payment made to shareholders from a company's profits. This distribution is typically issued as a cash payment, but it can also be in the form of additional shares of stock or other property. Dividends represent a way for companies to share a portion of their earnings with their investors, reflecting the company's profitability and providing a return on the shareholders' investments.

When a company earns a profit, it can choose to reinvest those earnings into the business for growth or distribute a portion of the profits to shareholders as dividends. This decision often indicates the company's financial health and management's confidence in future earnings.

Other options like a return on investment granted to creditors or an expense incurred by a company do not accurately define a dividend. Similarly, a type of tax on corporate income does not relate to shareholder payments, thus clarifying that the essence of dividends is grounded in profit distribution to equity owners, aligning perfectly with the definition provided in the correct choice.