The Main Types Of Dividend Payments
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Dividend is defined as a portion of the earnings of a company within a specified duration of time. It is paid out to the shareholders as determined by the board of directors. They may be in the form of shares of stock, property or cash. Such bonuses may be issued as one-off special payout amounts or as continuous payments as the value of the company continues to increase. There are different types of dividend payments that exist.
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.
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 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.
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.
The operating capital of a company may be paid out to the shareholders in some cases. This may happen, for instance, when the company is to be closed down. The amount of money that the shareholders receive in such a case is termed the liquidating dividend.
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.
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 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.
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.
The operating capital of a company may be paid out to the shareholders in some cases. This may happen, for instance, when the company is to be closed down. The amount of money that the shareholders receive in such a case is termed the liquidating dividend.
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