Interest vs. Dividend: Know the Difference
By Shumaila Saeed || Published on January 27, 2024
Interest is the cost of borrowing money or the return on fixed-income investments, while Dividends are a portion of a company's profits paid to shareholders.
Key Differences
Interest is paid on borrowed capital or deposits, based on a fixed rate over a period. Dividends are paid to shareholders, typically from company profits and can vary in amount.
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Jan 27, 2024
Interest payments are typically regular and predictable, based on an agreed rate. Dividend payments are less predictable, depending on company performance and policy decisions.
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Jan 27, 2024
Paying interest on loans or deposits is a legal obligation. However, paying dividends is at the discretion of the company and is not legally required.
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Jan 27, 2024
Interest is paid as a charge for using someone else's money. Dividends are paid as a reward to investors for their equity investment in a company.
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Jan 27, 2024
Interest is recorded as an expense for the borrower and income for the lender. Dividends are not an expense but a distribution of retained earnings to shareholders.
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Jan 27, 2024
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Comparison Chart
Financial Statement Impact
Expense for borrower, income for lender
Distribution of earnings, not an expense
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Jan 27, 2024
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Interest and Dividend Definitions
Interest
Earnings on fixed-income investments or deposits.
Her savings account accrued interest annually.
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Jan 08, 2024
Dividend
A reward to shareholders, typically paid from net income.
His dividend income supplemented his regular earnings.
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Jan 08, 2024
Interest
A percentage charged on the total amount of borrowed money.
The bank offered a 5% interest rate on their mortgage.
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Jan 08, 2024
Dividend
Profit sharing from a company to its equity investors.
The company declared a dividend of $2 per share.
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Interest
A financial charge for the privilege of accessing funds.
Interest on the business loan was calculated monthly.
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Dividend
A payment made by a corporation to its shareholders.
After a profitable year, the corporation increased its dividend.
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Jan 08, 2024
Interest
A state of curiosity or concern about or attention to something
An interest in sports.
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Jan 06, 2024
Interest
Something, such as a quality, subject, or activity, that evokes this mental state
Counts the theater among his interests.
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Dividend
A share of profits paid to a stockholder or to a policyholder in a mutual insurance society.
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Interest
Often interests Regard for one's own benefit or advantage; self-interest
It is in your best interest to cooperate. She kept her own interests in mind.
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Jan 06, 2024
Interest
Something in which such a right, claim, or share is held
Has interests overseas.
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Jan 06, 2024
Interest
A person or group of persons holding such a right, claim, or share
A petroleum interest.
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Jan 06, 2024
Dividend
(finance) A cash payment of money by a company to its shareholders, usually made periodically (e.g., quarterly or annually).
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Interest
Involvement with or participation in something
She has an interest in the quality of her education.
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Jan 06, 2024
Dividend
(arithmetic) A number or expression that is to be divided by another.
In "42 ÷ 3" the dividend is the 42.
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Jan 06, 2024
Dividend
(figuratively) Beneficial results from a metaphorical investment (of time, effort, etc.)
His 10,000 hours of practice and recitals eventually paid dividends when he become first-chair violinist.
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Jan 06, 2024
Dividend
A sum of money to be divided and distributed; the share of a sum divided that falls to each individual; a distribute sum, share, or percentage; - applied to the profits as appropriated among shareholders, and to assets as apportioned among creditors; as, the dividend of a bank, a railway corporation, or a bankrupt estate.
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Jan 06, 2024
Interest
To arouse the curiosity or hold the attention of
Your opinions interest me.
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Jan 06, 2024
Dividend
That part of the earnings of a corporation that is distributed to its shareholders; usually paid quarterly
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Jan 06, 2024
Interest
To cause to become involved or concerned with
Tried to interest her in taking a walk.
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Jan 06, 2024
Interest
The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed.
Our bank offers borrowers an annual interest of 5%.
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Jan 06, 2024
Dividend
A portion of a company's earnings distributed to shareholders.
She received a quarterly dividend from her stock investments.
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Jan 08, 2024
Dividend
Distribution of a company's earnings to its stockholders.
The annual dividend was a sign of the company's strong performance.
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Jan 08, 2024
Interest
(uncountable) A great attention and concern from someone or something; intellectual curiosity.
He has a lot of interest in vintage cars.
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Interest
(uncountable) Attention that is given to or received from someone or something.
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Interest
(countable) An involvement, claim, right, share, stake in or link with a financial, business, or other undertaking or endeavor.
When scientists and doctors write articles and when politicians run for office, they are required in many countries to declare any existing conflicts of interest.
I have business interests in South Africa.
She has an interest in the proceedings, and all stakeholders' interests must be protected.
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Jan 06, 2024
Interest
(countable) Something or someone one is interested in.
Lexicography is one of my interests.
Victorian furniture is an interest of mine.
The main character's romantic interest will be played by a non-professional actor.
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Jan 06, 2024
Interest
(uncountable) Condition or quality of exciting concern or being of importance.
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Jan 06, 2024
Interest
The persons interested in any particular business or measure, taken collectively.
The iron interest;
The cotton interest
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Jan 06, 2024
Interest
To engage the attention of; to awaken interest in; to excite emotion or passion in, in behalf of a person or thing.
It might interest you to learn that others have already tried that approach.
Action films don't really interest me.
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Jan 06, 2024
Interest
To be concerned with or engaged in; to affect; to concern; to excite.
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Jan 06, 2024
Interest
To engage the attention of; to awaken interest in; to excite emotion or passion in, in behalf of a person or thing; as, the subject did not interest him; to interest one in charitable work.
To love our native country . . . to be interested in its concerns is natural to all men.
A goddess who used to interest herself in marriages.
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Jan 06, 2024
Interest
To be concerned with or engaged in; to affect; to concern; to excite; - often used impersonally.
Or rather, gracious sir,Create me to this glory, since my causeDoth interest this fair quarrel.
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Jan 06, 2024
Interest
To cause or permit to share.
The mystical communion of all faithful men is such as maketh every one to be interested in those precious blessings which any one of them receiveth at God's hands.
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Jan 06, 2024
Interest
Excitement of feeling, whether pleasant or painful, accompanying special attention to some object; concern; a desire to learn more about a topic or engage often in an activity.
So much interest have I in thy sorrow.
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Jan 06, 2024
Interest
Participation in advantage, profit, and responsibility; share; portion; part; as, an interest in a brewery; he has parted with his interest in the stocks.
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Jan 06, 2024
Interest
Advantage, personal or general; good, regarded as a selfish benefit; profit; benefit.
Divisions hinder the common interest and public good.
When interest calls of all her sneaking train.
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Jan 06, 2024
Interest
A fee paid for the use of money; a fee paid for a loan; - usually reckoned as a percentage; as, interest at five per cent per annum on ten thousand dollars.
They have told their money, and let outTheir coin upon large interest.
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Jan 06, 2024
Interest
Any excess of advantage over and above an exact equivalent for what is given or rendered.
You shall have your desires with interest.
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Jan 06, 2024
Interest
The persons interested in any particular business or measure, taken collectively; as, the iron interest; the cotton interest.
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Jan 06, 2024
Interest
A sense of concern with and curiosity about someone or something;
An interest in music
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Jan 06, 2024
Interest
The power of attracting or holding one's interest (because it is unusual or exciting etc.);
They said nothing of great interest
Primary colors can add interest to a room
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Jan 06, 2024
Interest
A reason for wanting something done;
For your sake
Died for the sake of his country
In the interest of safety
In the common interest
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Jan 06, 2024
Interest
A fixed charge for borrowing money; usually a percentage of the amount borrowed;
How much interest do you pay on your mortgage?
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Jan 06, 2024
Interest
A diversion that occupies one's time and thoughts (usually pleasantly);
Sailing is her favorite pastime
His main pastime is gambling
He counts reading among his interests
They criticized the boy for his limited pursuits
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Jan 06, 2024
Interest
(law) a right or legal share of something; a financial involvement with something;
They have interests all over the world
A stake in the company's future
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Jan 06, 2024
Interest
(usually plural) a social group whose members control some field of activity and who have common aims;
The iron interests stepped up production
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Jan 06, 2024
Interest
The cost paid for borrowing money.
He paid interest on his car loan every month.
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Jan 08, 2024
Interest
The return earned on bonds or other fixed-income securities.
The government bonds yielded 3% interest per year.
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Jan 08, 2024
Repeatedly Asked Queries
How is interest calculated?
Based on a percentage of the principal amount of the loan or deposit.
Shumaila Saeed
Jan 27, 2024
Can interest rates change?
Yes, depending on the terms of the loan or investment.
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Jan 27, 2024
What is interest in finance?
A charge for borrowing money or the return on investments like deposits and bonds.
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Jan 27, 2024
Are dividends guaranteed?
No, they depend on company profits and policy decisions.
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Jan 27, 2024
Are interest payments tax-deductible?
Often, especially for business loans, but it depends on the tax laws.
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Jan 27, 2024
Is interest paid on savings accounts?
Yes, banks pay interest on various types of savings accounts.
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Jan 27, 2024
What is compound interest?
Interest calculated on the initial principal and also on the accumulated interest.
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Jan 27, 2024
How often are dividends paid?
Typically quarterly, but it can vary by company.
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Jan 27, 2024
Is interest received considered income?
Yes, it is taxable as income in most cases.
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Jan 27, 2024
What happens to dividends in a market downturn?
Companies may reduce or suspend dividend payments during financial hardships.
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Jan 27, 2024
Do government bonds pay interest?
Yes, they are a form of fixed-income investment.
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Jan 27, 2024
Are dividends paid only to large shareholders?
No, they are paid to all shareholders based on the number of shares held.
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Jan 27, 2024
What affects interest rates on loans?
Factors like market rates, credit risk, and loan term.
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Jan 27, 2024
Is interest paid on all types of bank accounts?
Mostly on savings and fixed deposit accounts, but not typically on current accounts.
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Jan 27, 2024
Can dividend rates change?
Yes, they can vary each year based on company performance.
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Jan 27, 2024
Can dividends be reinvested?
Yes, many choose to reinvest dividends to purchase more shares.
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Jan 27, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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Hifza Nasir
