Difference between redemption and distribution?

Question

Accepted Answer

Redemption is the repurchase of securities by the issuer, while distribution is the payment of earnings to shareholders.

Redemption involves the issuer buying back its own securities from investors, while distribution involves paying out earnings to shareholders.
Redemption reduces the number of outstanding securities, while distribution does not.
Redemption can be mandatory or voluntary, while distribution is typically mandatory for companies that pay dividends.
Examples of redemption include a company buying back its own stock or a bond issuer repaying the principal amount of a bond. Examples of distribution include paying dividends to shareholders or distributing profits from a mutual fund.

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