Dividends

RECENT NEWS
Forbes  49 min ago  Comment 
On 4/28/14, PG&E Corp.'s 5% Redeemable 1st Preferred (AMEX: PCG.PRD) will trade ex-dividend, for its quarterly dividend of $0.3125, payable on 5/15/14. As a percentage of PCG.PRD's recent share price of $23.41, this dividend works out to...
Wall Street Journal  4 hrs ago  Comment 
Johnson & Johnson raised its quarterly dividend by 6.1%, citing its results last year.
SeekingAlpha  6 hrs ago  Comment 
By Dividend Growth Investor: Once an investment is purchased, it has to be monitored frequently. While monitoring is important, it is also important to avoid too much action with your investments. The hardest part of dividend investing is sitting...
SeekingAlpha  Apr 24  Comment 
ByAbba's Aces: The last time I wrote about Polaris Industries Inc. (PII), I stated: "Due to the bearish technicals, overall market whiplash taking place, and fair valuation I'm not going to be pulling the trigger on this name at this price right...
SeekingAlpha  Apr 24  Comment 
By Crunching Numbers: A frequent critic of this author expressed disappointment that I did not put out an article about an 8K filed by Sirius XM Holdings (SIRI) April 22nd. The issue raised by Seeking Alpha commenter sirifair6 was on a recent...
SeekingAlpha  Apr 23  Comment 
By Dividend Growth Investor: For my retirement, I am planning on relying exclusively on income from my dividend portfolio. In order to achieve the dividend crossover point, I would need to be prudent about saving and then investing the cash in...
Market Intelligence Center  Apr 23  Comment 
SeekingAlpha  Apr 23  Comment 
By Brad Thomas: Fortresses are buildings that are designed to defend against threats of risk. From early times, the human population engaged in defensive activities that served to protect boundaries and the changing world of invasion. The word...
Equitymaster  Apr 23  Comment 
Posted by Equitymaster        The Indian economy has been on a slow track for quite some time now. However, despite a lot of things going wrong, what makes the country stand apart is the huge demographic dividend it enjoys. The country...
DailyFinance  Apr 23  Comment 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 04/22/14 -- Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) announced today that it will pay an eligible dividend of $0.45 per share on its outstanding Class A common shares and Class B...
Wall Street Journal  Apr 22  Comment 
MetLife Inc. on Tuesday increased its quarterly dividend by 27%, its second boost since the financial crisis.




 
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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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