Cash or stock dividends distributed to shareholders are not recorded as an expense on a company's income statement. Stock and cash dividends do not affect a company's net income or profit. Instead, dividends impact the shareholders' equity section of the balance sheet.

Is dividends an asset or expense?

For shareholders, dividends are an asset because they increase the shareholders' net worth by the amount of the dividend. For companies, dividends are a liability because they reduce the company's assets by the total amount of dividend payments.

Why are dividends not an expense?

Dividends are not considered an expense, because they are a distribution of a firm's accumulated earnings. For this reason, dividends never appear on an issuing entity's income statement as an expense. Instead, dividends are treated as a distribution of the equity of a business.