Dividend

Serious Information

Trivia

When a company earns profit, some of this money is typically reinvested in a business and called "retained earnings", and some of it can be paid to its shareholders as a "dividend". Paying dividends reduces cash available to a business, but this is payback for any investment in shares in the company. The company will have used the original share money to develop and grow, so this is a way of rewarding an investor in the company.

Many say the primary purpose of a business is to create a profit for its owners, and a dividend is the key way a business fulfills this mission. Although some say that shares are simply an investment option for a company, and that the share price is the just one of the issues a business must take into account.

The methods of sharing profits are: Cash dividends paid out in "real cash". A form of investment interest / income and are taxable in a year they are paid. It is the most common method of sharing corporate profits. Stock dividends or Scrip dividends are those paid out in form of additional stock shares of the issuing corporation, or other corporation eg subsidiary corporation. They are usually issued in proportion to shares owned eg for every 100 shares of stock owned, 5% stock dividend will yield 5 extra shares. Property dividends are those paid out in form of assets from the issuing corporation, or other corporation. Property dividends are usually paid in the form of products or services provided by a corporation. When paying property dividends, a corporation will use securities of other companies owned by the issuer.

The dividend yield on a company stock is the company's annual dividend payments divided by its market cap, or the dividend per share divided by the price per share. Often expressed as a percentage.
In the USA and ther jurisdictions, dividend payments are considered ordinary income and are taxed, the same as if a taxpayer had earned the income working at a job. Depending on the jurisdiction, interest income, collected rents, or other "unearned income" may also be taxed.

Some claim dividident payment can be poor for a company. The UK Post Office was criticised in 1998 when it was making big profits in the 1990s, it paid the government a special dividend - money which many say would have been better invested in new technology.

The Process
Dividends must be declared by a company’s Board of Directors each time they are paid.

There are three important dates to remember regarding dividends.

Declaration date: The declaration date is the day a Board of Director’s announces an intention to pay a dividend. On the declaration date, the Board will also announce a date of record and a payment date.

Date of record: This date is also known as “ex-dividend” date. It is the day upon which the stockholders of record are entitled to the upcoming dividend payment. According to Barron’s, a stock will usually begin trading ex-dividend or ex-rights the fourth business day before the payment date. In other words, only the owners of the shares on or before a date will receive the dividend. If you purchased shares of Coca Cola after the ex-dividend date, you would not receive its upcoming dividend payment; the investor from whom you purchased your shares would.

Payment date: This is the date the dividend will actually be given to the shareholders of company.

Trivia

The name comes from the arithmetic operation of division: if a / b = c then a is the dividend, b the divisor, and c the quotient.

In the USA, credit unions generally use the term "dividends" to refer to interest payments they make on depositors. These are not dividends in the normal sense and are not taxed as such; they are just interest payments. Credit unions call them dividends since, as credit unions are owned by their members, interest payments are effectively payments to owners.

The BBC runs games called worldcupdaq and celebdaq where gamers trade shares in famous celebrities, the share price fulctuates according to the media attention the share got. At the end of the week dividends are paid out accrodi ng to the price of the share.

Numerous soccer clubs have joined the stock exchange in recent decades and have not paid a dividend for as the club is more a cause than a business, and shares are bought for sentiment rather than to make money.

HSBC set up a prize draw to encourage dividend to be reinvested in the bank. Complete and return a dividend mandate form before 31 July 2006 to have future dividends paid directly to your bank or building society account and:

Foreign terms for dividend

Dividende = Danish

Dividendos = Spain

Osinko = Finland

Dividend = Dutch

Aktieutdelning = Sweden

Temettü = Turkish

Links on websites on subject

http://www.isda.org/ International Swaps and Derivatives Association

http://www.federalreserve.gov/Boarddocs/testimony/2000/20000621.htm Testimony of Chairman Alan Greenspan on Federal Reserve Board's views on the Commodity Futures Modernization Act of 2000

http://www.ise.ie/index.asp The home page of Irish stock exchange

http://www.nasdaq.com/ The homepage of the stock exchange

http://www.cityequities.com/
http://www.moneyweek.com

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