Residual Dividend

**Residual Dividend**

A residual dividend is a dividend policy where a company pays out dividends from the earnings remaining after all acceptable investment opportunities have been funded. In other words, the firm first finances its capital expenditures and working capital needs, and only distributes the leftover profits as dividends to shareholders. This approach helps ensure that the company retains sufficient funds for growth and expansion, while returning excess cash to investors. Residual dividends can result in variable dividend payments that fluctuate based on the company’s investment requirements and profitability.