A dividend taxed at capital gains rates rather than ordinary income rates.
A qualified dividend is a dividend from a U.S. corporation or qualified foreign corporation that meets IRS holding period requirements, taxed at preferential long-term capital gains rates (0%, 15%, or 20%) instead of ordinary income rates (up to 37%). To qualify, you may want to hold the stock for more than 60 days within a 121-day window around the ex-dividend date. Most stock dividends are qualified; REITs, preferred stock, and certain mutual fund distributions typically don't qualify. The tax advantage of qualified dividends is significant—a $5,000 dividend taxed at 15% capital gains rate ($750) versus 37% ordinary rate ($1,850) saves $1,100. This is a major reason dividend-paying stocks are attractive for retirement accounts where dividends are tax-sheltered.