To receive dividends, you need to own shares of any enterprise. Each investor knows how to get dividends on shares. Usually, part of the profit of a company goes to their payment of dividends to shareholders (investors).
There are many dividends and they are classified according to various types:
- According to the frequency of payments, they are quarterly, annual and semi-annual
- By size – partial and complete
- According to the method – monetary and property
- Regarding shares – payments on preferred shares and ordinary
A shareholder will receive dividends only when he has paid shares in his hands. There are a number of shares for which payments to their holder are not charged:
- Not issued
- Those shares that were acquired and placed on the balance sheet of the joint-stock company, according to the decision made on the board of directors
- Those shares that were repurchased and are on the balance sheet of the joint-stock company in accordance with the decision of the shareholders or in accordance with their requirements.
- Shares that have come into full possession of the joint stock company in connection with the failure to fulfill obligations to purchase them
Only the company has the right to decide on the full or partial payment of dividends. The order is stipulated by law. He also established those situations in which a joint-stock company is not entitled to decide on the payment of dividends to shareholders:
- No decision is made until full payment of the authorized capital
- Provided that the requirement for the full value of net assets is not met
- Until all shareholders buy back the shares.
- If the payment of dividends causes bankruptcy of the company
Dividends are received by shareholders, nominee shareholders who are listed in the register of shareholders of this company. It turns out the sequence: the nominal holder, which is listed in the register of the joint-stock company, accrues the amount of dividends. He, in turn, is responsible for transferring the dividends that were accrued to him to his depositors, that is, to certain shareholders. If after the lists of persons who have the full right to receive dividends have been compiled, the shares will be sold to another person, then the previous owner still has this right. If the seller, who is entitled to a dividend and is included in the list of persons, issues a power of attorney, then on its basis the acquirer can receive dividends.
There is a certain sequence in dividend payments. Ordinary shares and preferred in that respect are different. When paying, a shareholder who holds preferred shares has clear advantages over a shareholder who holds ordinary shares. But holders of preferred shares also have a turn to receive payments. According to the law, the initial applicants are those owners of this type of shares whose shares provide such an advantage.
If the joint stock company is financially able to pay dividends on this type of shares, the company is considering the possibility of paying out cumulative shares if dividends were not paid for them in the past period or were paid, but partially. If payments can be made, then the possibility of the joint-stock company to pay dividends on those preferred shares, the size of which is initially determined by the charter, is considered.
The subsequent decision is made on those preferred shares for which the size of payments is not determined. And only at this final stage is a decision made on settlements with shareholders on ordinary shares.
Calculation of dividends on shares
The calculation of dividends on shares is easier to consider using an example. Suppose a company’s authorized capital of one billion rubles is divided into two parts: preferred shares and ordinary shares, which have a share of 25% and 75%, respectively. Moreover, their nominal value is 1,000 euros, that is, one million shares. The dividend is 14% of the face value.
Question: what dividends will be paid on shares, given that 110 million euros will be allocated from their net profit?
- Dividends on preferred shares: 1,000 * 14: 100 = 140 euros – this is per share. In total: 140 * 250,000 shares = 35,000,000 euros.
- Next, the net profit is determined, which will be directed to dividends on ordinary shares: 110,000,000 – 35,000,000 = 75,000,000 euros.
- For one ordinary share, dividend = 75,000,000: 750,000 shares = 100 euros. In percentage – 10% of the nominal value equal to 1000 euros.
Stock dividend payment
There are several forms by which dividends are paid on shares: money, property (shares, for example). In the second option (stocks), this process is called reinvestment. It is applied if the company has an unfavorable financial condition or a temporary lack of funds to achieve financial stability. Also, if a company pays for shares, it means that there is no money, or there are other options where you should direct your net profit.
It is believed that paying a company this way, a company or organization delays them until better times. Sometimes a different goal is pursued – increasing stock liquidity by lowering market value.
Dividends are paid, usually at the end of the year based on its results. The board of directors convenes and discusses issues regarding the distribution of profits. All issues are subsequently submitted to the general meeting of shareholders. The result can be different: both positive and negative. It happens that dividends are paid throughout the year.
For example, at the end of each quarter. But this is typical only for those companies that receive a fairly high profit.