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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.
There are several ways in which the profit made by a corporation can be handled. One way is to give it back to shareholders in part or in its entirety as bonuses. The profit may be ploughed back and form part of the operating capital. In this case, it will be referred to as retained earnings. Some companies use this profit to buy back their own shares within the open market (buyback shares).
The dividend rate (the allocation for each owner or shareholder) can be quoted using one of two methods. The first is what is referred to as dividends per share (or simply, DPS). Here the payment is quoted in terms of dollars for each share held. The second method is known as the yield. In this approach, the payout is quoted as a percentage of the prevailing market price.
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 type is the stock dividend. This payment is usually issued when a company has minimal operating cash but is still keen to keep investors happy. Each shareholder gets additional shares that are proportional to how much they own. The shares that are issued are less than 25% of previously outstanding shares. If a greater proportion than this is issued, the transaction will be described as being a stock split.
Property dividend is issued in terms of assets that are held by the company. Such assets may include equipment, inventory, vehicles, real estate properties and so on. When the bonus is paid out to the shareholders the corporation restates the fair market value of the distributed asset. In most cases this value differs from the existing book value. Consequently, the property will carry a net gain or loss.
At times, the board of directors of a company may feel that they are not in a position to declare cash bonus any time in the near future. They may resolve to issue the shareholders with what are referred to as script dividends. This works as a promissory note in that the company will pay the bonus when the cash needed for this is available. A different interpretation of this payment is that it is the creation of new shares by the company.
There are situations that require shareholders receive their share of operating capital. One such situation is when the company is to be wound up. The payment that is given out in such a case is known as the liquidating dividend.
There are several ways in which the profit made by a corporation can be handled. One way is to give it back to shareholders in part or in its entirety as bonuses. The profit may be ploughed back and form part of the operating capital. In this case, it will be referred to as retained earnings. Some companies use this profit to buy back their own shares within the open market (buyback shares).
The dividend rate (the allocation for each owner or shareholder) can be quoted using one of two methods. The first is what is referred to as dividends per share (or simply, DPS). Here the payment is quoted in terms of dollars for each share held. The second method is known as the yield. In this approach, the payout is quoted as a percentage of the prevailing market price.
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 type is the stock dividend. This payment is usually issued when a company has minimal operating cash but is still keen to keep investors happy. Each shareholder gets additional shares that are proportional to how much they own. The shares that are issued are less than 25% of previously outstanding shares. If a greater proportion than this is issued, the transaction will be described as being a stock split.
Property dividend is issued in terms of assets that are held by the company. Such assets may include equipment, inventory, vehicles, real estate properties and so on. When the bonus is paid out to the shareholders the corporation restates the fair market value of the distributed asset. In most cases this value differs from the existing book value. Consequently, the property will carry a net gain or loss.
At times, the board of directors of a company may feel that they are not in a position to declare cash bonus any time in the near future. They may resolve to issue the shareholders with what are referred to as script dividends. This works as a promissory note in that the company will pay the bonus when the cash needed for this is available. A different interpretation of this payment is that it is the creation of new shares by the company.
There are situations that require shareholders receive their share of operating capital. One such situation is when the company is to be wound up. The payment that is given out in such a case is known as the liquidating dividend.
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