Posts
In this post I would explain about Stock dividends, which many people/newbies may not know about. Dividends is actually one way of sharing profits with the shareholders by the company management.
Generally for a company which is making profits there are four major ways to use the profit money by the management.
4 ways in which Company can use profit money:
1.Reinvest in company(for expansion/diversification
2.New Acquisitions
3.Sharing profits by giving dividends
4.Paying the debt incurred before
The 3rd way of sharing profits with shareholders is done by giving dividends/share. It is generally done through DD or cheque posted to the address of shareholders, stock dividends help greatly in increasing the investor confidence in the company. Dividends does not come with a date and neither are guranteed, but these are what every investor would like as paybacks on investment are always welcome. Dividends also add to profits from stocks as these are in addition to the capital gain in stock price over time. Many Cooperatives, allocate dividends according to shareholders activity, so their dividends are often considered to be a pre-tax expense.
Types of Dividends
At high level we can say there are 4 types as below:
1.Cash dividends: These dividends are most common and are paid per share, It is a form of investment income and are usually taxable to receiptants for same fiscal year.
2.Property dividends: Property dividends are given in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation. They are relatively rare and most frequently are securities of other companies owned by the issuer, however they can take other forms, such as products and services.
3.Stock dividendsStock dividends are paid in form of additional shares of the same company or any of the subsidary company, The proportion of stock dividend is fixed by management of the company ie 5 shares per hundred etc.
4.Interim dividends:Interim dividend is distribute by the company before it's annual report is finalized, these form the interim financial statements of the corporation
Generally for a company which is making profits there are four major ways to use the profit money by the management.
4 ways in which Company can use profit money:
1.Reinvest in company(for expansion/diversification
2.New Acquisitions
3.Sharing profits by giving dividends
4.Paying the debt incurred before
The 3rd way of sharing profits with shareholders is done by giving dividends/share. It is generally done through DD or cheque posted to the address of shareholders, stock dividends help greatly in increasing the investor confidence in the company. Dividends does not come with a date and neither are guranteed, but these are what every investor would like as paybacks on investment are always welcome. Dividends also add to profits from stocks as these are in addition to the capital gain in stock price over time. Many Cooperatives, allocate dividends according to shareholders activity, so their dividends are often considered to be a pre-tax expense.
Types of Dividends
At high level we can say there are 4 types as below:
1.Cash dividends: These dividends are most common and are paid per share, It is a form of investment income and are usually taxable to receiptants for same fiscal year.
2.Property dividends: Property dividends are given in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation. They are relatively rare and most frequently are securities of other companies owned by the issuer, however they can take other forms, such as products and services.
3.Stock dividendsStock dividends are paid in form of additional shares of the same company or any of the subsidary company, The proportion of stock dividend is fixed by management of the company ie 5 shares per hundred etc.
4.Interim dividends:Interim dividend is distribute by the company before it's annual report is finalized, these form the interim financial statements of the corporation
