Dividends

RECENT NEWS
Disciplined Approach to Investing  4 hrs ago  Comment 
For the month of March the dividend payers in the S&P 500 Index regained their footing and outperformed the non payers by a full 3.75 percentage points. In spite of this outperformance by the payers in March, the payers return continues to...
Dividend Growth Investor  7 hrs ago  Comment 
There are several guidelines about becoming a successful dividend investor. They are centered around several key points I am going to be discussing in the next three weeks. I will be updating this post with links to articles on the process of...
DailyFinance  Apr 4  Comment 
NanoTech Entertainment (OTCPINK: NTEK), a pioneer in bringing the 4K Ultra HD experience to consumers and businesses, announced today that it has filed a notice of corporate action with FINRA declaring a cash dividend. ...
DailyFinance  Apr 4  Comment 
Luxfer Holdings PLC (Luxfer Group) (NYSE:LXFR), a global materials technology company (the “Company”), today announced that its Board of Directors declared an interim dividend of $0.10 (net of fees) per American Depositary...
Automotive World  Apr 4  Comment 
DailyFinance  Apr 4  Comment 
GreenHunter Resources, Inc. (NYSE MKT: GRH) (NYSE MKT: GRH.PRC) (the “Company”), announced today that it has declared a monthly cash dividend on the Company’s 10.0% Series C Cumulative Perpetual Preferred Stock...
Dividend Growth Investor  Apr 4  Comment 
Dividend investors should not view every stock they purchase as a price that fluctuates on a computer screen however. On the contrary, they should view each stock purchased as a share in a business. Therefore, the most important thing to focus on...
StreetInsider.com  Apr 3  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Dividends/Schulman+%28SHLM%29+Declares+%240.20+Quarterly+Dividend%3B+2.1%25+Yield/9350687.html for the full story.
SeekingAlpha  Apr 3  Comment 
By Brian Nelson: When dividend growth companies shed assets, the proceeds can be used for further dividend expansion. We like this quite a bit. General Electric (GE), a holding in both Valuentum's Best Ideas Newsletter portfolio and its Dividend...
SeekingAlpha  Apr 3  Comment 
The DIV-Net  Apr 3  Comment 
Recently, I was contacted by a reader named Talgat. He emailed me all the way from Kazakhstan. It’s truly wonderful to have readers from halfway across the world! Talgat had a question about dividend reinvestment. I wrote about this a while...
DailyFinance  Apr 2  Comment 
TORONTO, ONTARIO -- (Marketwired) -- 04/02/14 -- Just Energy Group Inc. (TSX:JE) (NYSE:JE) filed notice with the Toronto Stock Exchange and the New York Stock Exchange today announcing its April dividend. A dividend of Cdn. $0.07/common share...




 
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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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