A liquidating dividend is used when a corporation is dissolving and it needs to distribute its assets to its shareholders.
Paid after satisfying all corporate debts, the liquidating dividend is meant to provide a return on investment.
Its called a liquidating dividend because it takes money out of the company without sufficiently replenishing it with profits.
Sharon owns 1,000 shares in the Tablet Universe Company and the company just announced that it is paying a liquidating dividend.
The business must be profitable or have a positive retained earnings account in order to make a regular dividend.