Dividends represent a portion of company profits or cash reserves that are distributed back to the owners of the company (shareholders).
Dividends can be in the form of cash or stock. Cash dividends are payments made by the company to shareholders in the form of cash. Stock dividends are new shares given to shareholders.
How does it affect my account?
Cash dividends will increase your cash holdings and may provide a regular income on investment. Stock dividends provide shareholders with the choice to keep the stock or change it into cash.
Dividends are a form of income and must be reported in annual tax returns.
Dividends from US-based Publicly Traded Partnerships
US Tax withholding on distributions from Publicly Traded Partnerships (a type of limited partnership) is withheld at 37% (2018) as this is earned income in the US.