What Is Revenue Reserve?

Revenue reserve refers to profits that publicly owned companies do not distribute to shareholders, according to The Law Dictionary. Instead, companies hold onto the reserve to promote further growth in the business.

Many companies use revenue reserve in order to keep their dividend payments flowing regularly. Money that goes into the revenue reserve one year can come out as dividends in future years when profits are a bit leaner so that investors remain satisfied, according to Morningstar. This gives shareholders who rely on dividend income peace of mind. There are some funds that have amassed considerable reserves by saving year after year.