Definition
The financial accounting term dividends payable is used to describe the cash owed by a company to its stockholders, based on a distribution that has been formally authorized by the company's board of directors. Dividends payable are categorized as a current liability on the company's balance sheet.
Explanation
Once the board of directors has approved the payment of a dividend, a liability is created on behalf of the company. Since this liability is generally due to stockholders within the fiscal year, dividends payable are assigned to the current liabilities section of the balance sheet.
If the company announces a dividend payout in the form of shares of common stock, this payout does not qualify as a current liability. An asset is not required to issue additional shares of stock.
Related Terms
- The times preferred dividends earned measures a company's ability to meet its preferred dividend payments to shareholders. This financial ratio only requires two inputs, net income and the company's annual preferred dividends paid, both of which can be found on the company's income statement.
Moneyzine EditorSeptember 21st, 2023 
The ratio of dividends paid to common stockholders relative to market price per share is known as the dividend yield. This ratio is typically expressed in terms of a percentage.Moneyzine EditorNovember 6th, 2024
The term convertible preferred stock is used to describe one of several classes of preferred stock that can be issued by a company. To add to the marketability of this investment, convertible preferred stock provides the holder with the right to exchange this investment for shares of common stock.Moneyzine EditorNovember 6th, 2024
The term ex-dividend date refers to the day after which a security no longer carries with it the right to a company's recently declared dividend payment. An investor that acquires a security on or after the ex-dividend date is not entitled to the payment of that dividend.Moneyzine EditorNovember 6th, 2024
The term liquidating dividend refers to the process of providing shareholders with a partial or full distribution of their capital investment in the company. Liquidating dividends are typically paid when a company is going out of business or has sold a portion of the enterprise.Moneyzine EditorJanuary 23rd, 2024- The term scrip dividend refers to the process of providing shareholders with the choice of receiving a cash dividend, a dividend at a future point in time, or common stock. When a corporation issues a scrip dividend, they're allowing shareholders to increase the size of their holdings without incurring any fees.Moneyzine EditorSeptember 21st, 2023
- The term special funds refers to those assets set aside by companies for a specific purpose, and unavailable for ordinary business operations. Special funds include cash set aside to meet a specific financial obligation in the near term, as well as those that might appear in the long-term investment section of the balance sheet.Moneyzine EditorSeptember 21st, 2023
