Dividend refers to a portion of profit or earnings of a corporation within a certain period of time. The amount to be paid out to shareholders is recommended by the board of directors after analysis of the financial accounts. The different types of dividend payments can be done in cash, shares of stock or property. Commonly, the bonus is issued once annually but may be done more frequently depending on the profitability of the company.
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).
There are two main methods that are used in quoting the dividend rate (what each shareholder is to get). The first is called the dividends per share, DPS. It involves quotation of bonuses in terms of dollars (or other currency unit) for each share held. The second, referred to as the yield, involves quoting bonus payments as percentages of the prevailing market prices.
The commonest type of bonus is the cash dividend. This is determined by the board of directors of a company on a specific date known as the date of declaration. The cash is assigned to individual stock holders of the company on the date of record. Stock holders receive their cash on the date of payment. The cash received is proportional to the equity that is held by each stock holder.
Stock dividends are another common type of bonuses that are issued to shareholders. They are the preferred mode of payout when a company is short of operating capital but still wants to keep its investors happy. Each shareholder receives additional shares that are proportional to their preexisting shareholding. The proportional of shares issued should be less than 25% of outstanding shares for this to be true. If the value is more the transaction will be referred to 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.
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).
There are two main methods that are used in quoting the dividend rate (what each shareholder is to get). The first is called the dividends per share, DPS. It involves quotation of bonuses in terms of dollars (or other currency unit) for each share held. The second, referred to as the yield, involves quoting bonus payments as percentages of the prevailing market prices.
The commonest type of bonus is the cash dividend. This is determined by the board of directors of a company on a specific date known as the date of declaration. The cash is assigned to individual stock holders of the company on the date of record. Stock holders receive their cash on the date of payment. The cash received is proportional to the equity that is held by each stock holder.
Stock dividends are another common type of bonuses that are issued to shareholders. They are the preferred mode of payout when a company is short of operating capital but still wants to keep its investors happy. Each shareholder receives additional shares that are proportional to their preexisting shareholding. The proportional of shares issued should be less than 25% of outstanding shares for this to be true. If the value is more the transaction will be referred to 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.
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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