Dividend dilution is the amount of decrease in dividends a current shareholder would receive if new shares are issued.

 

 

 

 

 

 

For example, say a corporation has $4.00 to pay dividends. If there are four people enrolled in the corporation, they would each receive $1.00. [4 x $1.00 = $4.00]. If you add one shareholder, you have to split the same $4.00 into five shares resulting in each receiving $0.80 per share. [5 x $0.80 = $4.00]. The difference between a $1.00 dividend and an $0.80 dividend is called “dilution.”