What are dividend units?

A dividend unit is an amount equal to a dividend for each share of stock that would be payable on the dividend record date. Dividend units are sometimes offered to employees in the US as part of their vesting plan for retirement.

Where have you heard about dividend units?

Dividend units are usually granted for restricted stock options, which have become popular in the US for firms that want to reward employees with a share of ownership in the business but don't want the admin hassles of traditional stock option plans.

What you need to know about dividend units.

Many companies don’t hold cash, or even pay for dividend equivalents. Instead, they calculate the number of units that correspond to each dividend payment.

Restricted stock is granted to an employee on the grant date, and the vesting schedule outlines the percentage of options that are allowed to be sold each year until the employee acquires full ownership of the assets, for example after 5 years. Dividend units can be granted for the agreed-upon term.

Find out more about dividend units.

Read our definitions of restricted stock option and dividend policy.