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A capital dividend is an amount of money that a corporation can pay out to its shareholders from capital gains, rather than from regular operating or business profits.

Important detail in Quebec (and across Canada):

This type of dividend is usually non-taxable for the shareholder, because it comes from a special account called the Capital Dividend Account (CDA), as provided for by law.

Simple example: A company sells a building for a large capital gain. This gain, once calculated according to tax rules, can be used to pay a capital dividend to its shareholders. The shareholder then receives this amount.

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