Dividend is a piece of the company’s earnings which is distributed to its shareholders and among the companys board of directors. High yield dividends are quoted as Dividend Per Share (DPS) or dividend. However several companies don’t offer dividends as all the profits are reinvested to ensure quicker and better than average growth.
The board of directors determines that the percentage of the profit is distributed as dividends among shareholders. Dividends are issued quarterly or yearly, and the business may cease by paying dividends at any given point of time. However if the firm stops paying dividends then its market value is affected, consequently dividends are paid consistently and even if there is absolutely no increase within the dividend at least they will get dividends on a regular basis. The dividend shares are yet another way to increase the market value of the company.
Kinds Of dividends
Companies offer three standard types of dividends.
Cash Dividends: This is actually the most frequent and popular technique of sharing a business’s profits. A portion of the company’s profit is paid to investors as dollar per share. They may be taxed at a maximum amount of 15%. The dividends are distributed after the company has paid income tax. The investors can also be taxed once they received the dividends.
Property Dividends: Property dividends are paid out within the kind of goods or services supplied by the corporation. They can be paid in the form of assets including gold, silver, cocoa beans etc. by companies.
Special Dividends can be obtained rarely, for example during times when the organization wins litigation, when the business sells a company or liquidation of investments. Some companies also offer special dividends if they have high number of extra cash, as a way to increase the market value of their stocks.