Dividends

RECENT NEWS
SeekingAlpha  12 hrs ago  Comment 
By Stan Stafford: Overview Earlier in the year, I wrote a ten-part series of articles in which I ranked the Dividend Champion stocks from the best (Heavyweights) to the worst (Flyweights). In this series of articles, I will be reviewing a...
SeekingAlpha  Sep 19  Comment 
By Tradevestor: McDonald's Corporation (NYSE:MCD) has just announced its annual dividend increase as Seeking Alpha has covered here. September continues to be a busy month for dividend investors with lots of dividend related announcements. Here...
SeekingAlpha  Sep 19  Comment 
By Christopher F. Davis: Annaly Capital (NYSE:NLY) just announced their common stock dividend for the third quarter. Annaly has declared the third quarter 2014 common stock cash dividend to be $0.30 per common share. This dividend is payable...
SeekingAlpha  Sep 19  Comment 
By Mike Nadel: After buying 1,000 shares of General Electric (NYSE:GE) at $30.21 apiece in June 2008, I soon faced an income investor's worst-case scenario. Just nine months later, GE's price was down 81%, bottoming out at $5.87. Then, three...
SeekingAlpha  Sep 18  Comment 
By Fredrik Arnold: Yield (dividend / price) results from here verified by Yahoo Finance were calculated for small, mid, and large cap Basic Materials stocks as of market closing prices on September 16. Small cap firms were valued at $200M(illion)...
Wall Street Journal  Sep 18  Comment 
Kroger Co. said Thursday that it would boost its quarterly dividend 12%, as the grocery retailer continues to post strong earnings and sales growth on what it sees as improving consumer confidence.
Wall Street Journal  Sep 18  Comment 
Wall Street Journal  Sep 18  Comment 
SeekingAlpha  Sep 18  Comment 
By Morningstar: By Samuel Lee This article was published in the July 2014 issue of Morningstar ETFInvestor. Download a complimentary copy of ETFInvestor here. It’s been a little over three years since iShares Core High Dividend...
Top Foreign Stocks  Sep 18  Comment 
The current dividend yield of the S&P 500 is 1.91%. It has stayed around the 2% mark for many years. Despite corporate profits soaring and reaching record-high levels most U.S. companies have not shared the higher earnings with their...
newratings.com  Sep 18  Comment 
LONDON (dpa-AFX) - Premier Farnell plc (PFL.L), a multi-channel, high service distributor, reported Thursday that its first-half profit before taxation declined 4.5 percent to 36.4 million pounds from last year's 38.1 million...
SeekingAlpha  Sep 17  Comment 
By Stockerblog: Here is our latest update on the stock trading technique called "Buying Dividends," also commonly referred to as "Dividend Capture." This is the process of buying stocks before the ex-dividend date and selling the stock shortly...




 
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Dividends are payments made by a company to its shareholders. When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders of the company as a dividend. Paying dividends is not an expense; rather, it is the division of an asset among shareholders. Many companies retain a portion of their earnings and pay the remainder as a dividend. Publicly-traded companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one.

Overview

The profits of a company can either be reinvested in the business or paid to its shareholders as a dividend. The frequency of these varies by country. In the United States, dividends of publicly-traded companies are usually declared quarterly by the board of directors. In some other countries dividends are paid biannually, as an interim dividend shortly after the company announces its interim results and a final dividend typically following its annual general meeting. In other countries, the board of directors will propose the payment of a dividend to shareholders at the annual meeting who will then vote on the proposal.

In the United States, a decision regarding the amount and frequency of dividends is solely at the discretion of the board of directors). Shareholders are explicitly forbidden from introducing shareholder resolutions involving specific amounts of dividends (SEC Form 8-A [3])

Where a company makes a loss during a year, it may opt to continue paying dividends from the retained earnings from previous years or to suspend the dividend. Where a company receives a non-recurring gain, e.g. from the sale of some assets, and has no plans to reinvest the proceeds the money is often returned to shareholders in the form of a special dividend. This type of dividend is often larger than usual and occurs outside of the normal dividend distribution schedule.

Dates

Dividends must be "declared" (approved) by a company’s Board of Directors each time they are paid. There are four important dates to remember regarding dividends. These are discussed in detail with examples at the Securities and Exchange Commission site [1]

Declaration date

The declaration date is the day the Board of Directors announces its intention to pay a dividend. On this day, a liability is created and the company records that liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.

Ex-dividend date

The ex-dividend date is the day after which all shares bought and sold no longer come attached with the right to be paid the most recently declared dividend. This is an important date for any company that has many stockholders, including those that trade on exchanges, as it makes reconciliation of who is to be paid the dividend easier. Prior to this date, the stock is said to become dividend ('with dividend'): existing holders of the stock and anyone who buys it will receive the dividend, whereas any holders selling the stock lose their right to the dividend. On and after this date the stock becomes ex dividend: existing holders of the stock will receive the dividend even if they now sell the stock, whereas anyone who now buys the stock now will not receive the dividend.

It is relatively common for a stock's price to decrease on the ex-dividend date by an amount roughly equal to the dividend paid. This reflects the decrease in the company's assets resulting from the declaration of the dividend. The company does not take any explicit action to adjust its stock price; in an efficient market, buyers and sellers will automatically price this in.

Record date

Shareholders who properly registered their ownership on or before the date of record will receive the dividend. Shareholders who are not registered as of this date will not receive the dividend. Registration in most countries is essentially automatic for shares purchased before the ex-dividend date.

Payment date

The payment date is the day when the dividend cheques will actually be mailed to the shareholders of a company or credited to brokerage accounts.

References

  1. [1]
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