Tyopes of Dividends

8/3/2019 Tyopes of Dividends

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Dividends, StockDividends, Stock--Splits andSplits and

Their Impact on StockTheir Impact on Stock


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DividendDividend

DividendDividend inin simplesimple termsterms isis nothingnothing butbut aa cashcashdistributiondistribution byby aa CompanyCompany toto itsits shareholdersshareholders..

Exact Meaning of Dividend:Exact Meaning of Dividend:

AA distributiondistribution ofof aa portionportion ofof aa company'scompany's earnings,earnings,decideddecided byby thethe boardboard ofof directors,directors, toto aa classclass ofof itsitsshareholdersshareholders.. TheThe dividenddividend isis mostmost oftenoften quotedquoted inin termsterms

ofof thethe dollardollar amountamount eacheach shareshare receivesreceives.. ItIt cancan alsoalso bebequotedquoted inin termsterms ofof aa percentpercent ofof thethe currentcurrent marketmarket price,price,referredreferred toto asas dividenddividend yield,yield, whichwhich referredreferred toto asasDividendDividend PerPer ShareShare (DPS)(DPS)..


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Dividend TypesDividend Types

Cash DividendCash Dividend

Stock DividendStock Dividend Bond DividendBond Dividend

Property DividendProperty Dividend

Optional DividendOptional Dividend Interim DividendInterim Dividend

Special DividendSpecial Dividend


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Cash DividendCash Dividend

CashCash DividendDividend isis nothingnothing butbut moneymoneypaidpaid toto stockholders,stockholders, normallynormally outout ofof thethecorporation'scorporation's currentcurrent earningsearnings ororaccumulatedaccumulated profitsprofits.. AllAll dividendsdividends mustmust bebedeclareddeclared byby thethe boardboard ofof directorsdirectors andand areare

taxabletaxable asas incomeincome toto thethe recipientsrecipients..


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Stock DividendStock Dividend

AA dividenddividend paymentpayment mademade inin thethe formformofof additionaladditional shares,shares, ratherrather thanthan aa cashcashpayoutpayout.. AlsoAlso knownknown asas aa ScripScrip DividendDividend..StockStock dividendsdividends representrepresent aa distributiondistribution ofofstockstock ofof lessless thanthan 2525%% ofof totaltotal

outstandingoutstanding sharesshares.. ItsIts alwaysalways representsrepresentsinin termsterms ofof percentagepercentage..


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Bond DividendBond Dividend

AA dividenddividend distributiondistribution thatthat isis paidpaid totoshareholdersshareholders inin thethe formform ofof aa bondbond insteadinsteadofof cashcash..


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Property DividendProperty Dividend

An An alternativealternative toto cashcash oror stockstockdividendsdividends.. AA propertyproperty dividenddividend cancan eithereitherincludeinclude sharesshares ofof aa subsidiarysubsidiary companycompany ororphysicalphysical assetsassets suchsuch asas inventoriesinventories thatthatthethe companycompany holdsholds.. TheThe dividenddividend isis

recordedrecorded atat thethe marketmarket valuevalue ofof thethe assetassetprovidedprovided..


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Optional DividendOptional Dividend

A A dividenddividend inin whichwhich thethe shareholdershareholdermaymay choosechoose amongamong twotwo oror moremore formsforms ofof

paymentpayment..

ForFor example,example, aa firm'sfirm's directorsdirectors maymaygivegive thethe shareholdersshareholders aa choicechoice betweenbetween

cashcash oror anan equalequal dollardollar amountamount ofof stockstock..


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Interim DividendInterim Dividend

A A dividenddividend paymentpayment mademade beforebefore aacompany'scompany's AGM AGM andand finalfinal financialfinancial

statementsstatements.. ThisThis declareddeclared dividenddividend usuallyusuallyaccompaniesaccompanies thethe company'scompany's interiminterimfinancialfinancial statementsstatements..


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Special DividendSpecial Dividend

A A nonnon--recurringrecurring distributiondistribution ofofcompanycompany assets,assets, usuallyusually inin thethe formform ofof

cash,cash, toto shareholdersshareholders.. AA specialspecial dividenddividend isislargerlarger comparedcompared toto normalnormal dividendsdividends paidpaidoutout byby thethe companycompany.. AlsoAlso referredreferred toto asas

anan extraextra dividenddividend..


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Dividend DatesDividend Dates

ThereThere werewere fourfour differentdifferent dates,dates, whichwhichthethe dividenddividend willwill bebe announced,announced, paid,paid,

recordedrecorded andand oneone moremore datedate waswas exex--dividenddividend datedate..

DividendDividend DeclarationDeclaration Date,Date,

ExEx--DividendDividend Date,Date,

RecordRecord DateDate andand

DividendDividend PaymentPayment DateDate


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Dividend Declaration DateDividend Declaration Date

TheThe datedate onon whichwhich thethe nextnext dividenddividendpaymentpayment isis announcedannounced byby thethe directorsdirectors ofof

aa companycompany.. ThisThis statementstatement includesincludes thethedividend'sdividend's size,size, exex--dividenddividend datedate andandpaymentpayment datedate.. ItIt isis alsoalso referredreferred toto asas thethe

announcementannouncement datedate..


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Dividend Ex dateDividend Ex date

TheThe datedate onon oror afterafter whichwhich aa securitysecurity isistradedtraded withoutwithout aa previouslypreviously declareddeclared dividenddividend oror

distributiondistribution.. AfterAfter thethe exex--date,date, aa stockstock isis saidsaid tototradetrade exex--dividenddividend.. TheThe exex--datedate isis usuallyusually twotwobusinessbusiness daysdays beforebefore thethe recordrecord datedate.. InIn orderordertoto getget thethe dividend,dividend, stockholdersstockholders mustmust buybuy thethe

stockstock beforebefore thethe exex--dividenddividend datedate.. OnOn andand afterafterthethe exex--date,date, thethe buyerbuyer willwill notnot receivereceive thethedividenddividend andand thethe stockstock isis saidsaid toto tradetrade withoutwithoutdividenddividend..


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Dividend Record DateDividend Record Date

ForFor example,example, ifif anyany CompanyCompany issuesissues aadividend,dividend, thenthen fromfrom thethe recordrecord datedate

onwardsonwards eacheach shareholdershareholder willwill receivereceive thethedividenddividend..


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Dividend Payment DateDividend Payment Date

TheThe datesdates onon whichwhich stockholdersstockholders arearesentsent dividenddividend paymentspayments.. ThatThat is,is, thethe

dividenddividend paymentpayment datesdates areare thethe datesdateswherewhere stockholdersstockholders receivereceive dividendsdividends thatthattheythey areare eithereither guaranteedguaranteed oror thatthat waswas

previouslypreviously declareddeclared byby thethe CompanyCompany..


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Impact of Dividend on Stock PricesImpact of Dividend on Stock Prices

OnceOnce thethe dividenddividend hashas beenbeen announced,announced, thethe marketmarketpricesprices itit intointo thethe stockstock.. IfIf aa companycompany shouldshould announceannounce aa$$11..0000 perper shareshare quarterlyquarterly dividend,dividend, thethe marketmarket willwill addadd

thatthat $$11..0000 intointo thethe stockstock priceprice.. ForFor exampleexample aa $$1919 stockstockwouldwould usuallyusually jump jump toto $$2020 oror so,so, unlessunless thethe dividenddividendwaswas consideredconsidered toto alreadyalready havehave beenbeen pricedpriced inin.. ThusThus ififyouyou buybuy thethe stockstock afterafter thethe dividenddividend isis announced,announced, youyouwillwill notnot receivereceive aa freefree dividenddividend.. YouYou willwill havehave paidpaid forfor

thethe impendingimpending dividenddividend inin thethe stock'sstock's priceprice.. WhenWhen aastockstock goesgoes exex--dividend,dividend, onon thethe otherother hand,hand, thethe stockstockpriceprice willwill bebe drivendriven downwarddownward becausebecause thethe dividenddividendpaymentpayment reflectsreflects aa distributiondistribution ofof corporatecorporate assets,assets, andandthusthus somesome ofof thethe share'sshare's valuevalue..

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Tyopes of Dividends