What is a dividend?

A dividend is best described as a portion of earnings distributed to stockholders. Companies distribute dividends to provide a return on investment to their shareholders, reflecting a share of the company's profits. This practice can serve as an incentive for investors to hold shares in a company, as it offers a tangible profit benefit. Dividends can be distributed in the form of cash payments or additional shares, depending on the company's policy and the preferences of its shareholders.

The other choices illustrate concepts related to corporate finance but do not accurately define what a dividend is. A fixed percentage of the stockholder's investment refers more to a yield or return on investment rather than the actual distribution of earnings. A tax on corporate profits relates to taxation and is not a benefit to shareholders, while a type of government bond pertains to debt securities issued by the government, which is outside the scope of what dividends represent in the context of corporate finance.