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Dividend |
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DividendThe amount paid each quarter by a corporation to its stockholders for each share of stock.DividendThe distribution of part of a company's earnings to shareholders, usually twice a year in the form of a main dividend and an interim dividend.Normally, the dividend is expressed on a 'per share' basis, for instance - 3p per share. This makes it easy to see how much of the company's profits are being paid out, and how much are being retained by the company to plough back into the business. So a company that has earnings per share in the year of 6p, and pays out 3p per share as a dividend, is passing half of its profits on to shareholders and retaining the other half.Directors of a company have discretion as to how much of a dividend to declare, and they don't have to pay a dividend at all. Indeed , for young growth companies making no profits dividends are not generally expected.When they are expected, however, the City hates to be disappointed! Fund managers rely on big companies producing consistent dividends year after year, and wobetide the company that surprises the City by announcing a reduced or nil dividend.As a private investor, it is worth checking the dividend history of the company you invest in to see if it has produced a reliable stream over the years. If income is important to you (as opposed to capital growth), the dividend yield is vital information to you.Note that dividends are nearly always paid in cash, but they can also be in the form of stock (scrip dividend).Similar MatchesDiscounted dividend model (DDM)Discounted dividend model (DDM)A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends. Tax differential view (of dividend policy)Tax differential view (of dividend policy)The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends. Dividend in arrearsDividend in arrearsAccumulated dividends on cumulative preferred stock that are deemed payable to the current holder. Dividend discount modelDividend discount modelA way of valuing a share based on the net present value of the dividends that you expect to receive in the future.The simplest version of the model assumes that the company's dividend rate remains constant. The 'fair' price of the share is the dividend (in pennies per share) divided by the required rate of return. So if you want 10% a year from your shares, the value of a company paying a 7p dividend is 70p. If you think a return of 8% is satisfactory, the value of the same share is 87.5p.A more complex model assumes that the dividends of the company grow at a consistent rate. The fair price to pay is the next dividend divided by the required rate of return minus the rate at which dividends are expected to grow. So if the 7p dividend is expected to grow at 5% per year, an investor requiring an 12% return would value the shares at (7p x 1.05) divided by (0.12 - 0.05)= (7.35p) divided by (0.07)= 105p Dividends received deductionDividends received deductionA corporate tax deduction on income allowed by company A that is in ownership of shares of company B and receives dividends on the shares of company B. Further SuggestionsYear end dividendExpected dividend yield Dividend requirement unpaid dividend Special dividend cum dividend Residual dividend approach stock dividend Insurance dividend Omitted dividend Homemade dividend Liquidating dividend Dividend capture Dividend clawback Accumulated dividend Dividend Disbursing Agent income dividend final dividend Outstanding Dividends Interim dividend Dividend policy Dividend rollover plan dividend yield Optional dividend Dividend Order |
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