Dividend is a term that refers to a share of profit that is issued to a shareholder of a company. The exact value of bonus to be paid out is recommended by the directors after an analysis of accounts within a specified period of time. There are many various types of dividend payments that include shares of stock, property and cash. The frequency of payment varies from one company to another but most of them do it once annually.
When companies make a profit during a financial year, there are a number of ways in which such a profit can be handled. One of the ways is to issue it in whole or in part to the shareholders. Another option is to withhold it as operating capital (also referred to as retained earnings). The company may also decide to repurchase its own shares in the open market. These form of shares are known as buyback shares.
There are two main ways of quoting the allocation for each shareholder (or dividend rate). The first option is to quote it in dollars (or any other unit of currency) for each share held (also referred to as dividends per share, DPS). The second option is to quote the allocation as a percentage of prevailing market price. In this instance, it will be known as the yield.
The commonest type of payment is the cash bonus. The directors determine the quoted payment on the day of declaration. The date on which this payment is allocated to the recipients is known as the date of record and the date on which the payments are received by the shareholders is known as the date of payment. The amount of money received is proportional to the number of shares held.
Another commonly issued type is the stock dividend. This type is given to shareholders when a company is cash-stripped but is still keen on keeping the investors happy. Instead of cash, the shareholders receive additional stocks at no extra cost. The additional shares received are proportional to those held by the individual shareholder. The total number of shares issued must be less than 25% of those previously outstanding. If they are more, the resultant transaction is known as a stock split.
Property dividends are also non-monetary. They may include any of the assets of a company such as vehicles, inventory, pieces of equipment and real estate properties among others. The company restates the fair market value of the distributed assets. This value may either be higher or lower than the book value which means that it will be captured either as a loss or a profit.
When a company does not have enough funds to give as bonuses in the near future, the shareholders receive what is referred to as a script payment. This works more or less as a promissory note meaning that they will be paid at a later date as soon as the funds for the same are available. Another way of looking at scrip dividend is that it is equivalent to new shares created by the company.
In some cases the directors may decide to return the original capital to the shareholders. This payment is referred to as the liquidating dividend. Such may be necessary when there are plans to shut down the business.
When companies make a profit during a financial year, there are a number of ways in which such a profit can be handled. One of the ways is to issue it in whole or in part to the shareholders. Another option is to withhold it as operating capital (also referred to as retained earnings). The company may also decide to repurchase its own shares in the open market. These form of shares are known as buyback shares.
There are two main ways of quoting the allocation for each shareholder (or dividend rate). The first option is to quote it in dollars (or any other unit of currency) for each share held (also referred to as dividends per share, DPS). The second option is to quote the allocation as a percentage of prevailing market price. In this instance, it will be known as the yield.
The commonest type of payment is the cash bonus. The directors determine the quoted payment on the day of declaration. The date on which this payment is allocated to the recipients is known as the date of record and the date on which the payments are received by the shareholders is known as the date of payment. The amount of money received is proportional to the number of shares held.
Another commonly issued type is the stock dividend. This type is given to shareholders when a company is cash-stripped but is still keen on keeping the investors happy. Instead of cash, the shareholders receive additional stocks at no extra cost. The additional shares received are proportional to those held by the individual shareholder. The total number of shares issued must be less than 25% of those previously outstanding. If they are more, the resultant transaction is known as a stock split.
Property dividends are also non-monetary. They may include any of the assets of a company such as vehicles, inventory, pieces of equipment and real estate properties among others. The company restates the fair market value of the distributed assets. This value may either be higher or lower than the book value which means that it will be captured either as a loss or a profit.
When a company does not have enough funds to give as bonuses in the near future, the shareholders receive what is referred to as a script payment. This works more or less as a promissory note meaning that they will be paid at a later date as soon as the funds for the same are available. Another way of looking at scrip dividend is that it is equivalent to new shares created by the company.
In some cases the directors may decide to return the original capital to the shareholders. This payment is referred to as the liquidating dividend. Such may be necessary when there are plans to shut down the business.
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