Dividends are the amount of profit that the shareholders of the company receive based on the results of its work (usually for a year). As a rule, when purchasing a share, its holder does not think about the level of dividends. A much larger profit can be brought by an increase in the market rate of a security. Dividend yield is often not high and is in the order of 5-10%.
Instructions
Step 1
Dividends are usually paid at the end of the year. The board of directors discusses the areas of profit distribution, which are then submitted for consideration by the general meeting of shareholders. Its participants can vote both positively and negatively. Sometimes businesses pay dividends throughout the year, for example at the end of the quarter. This happens when it makes high profits, usually associated with the cyclical nature of pricing.
Step 2
In order to receive dividends on shares, it is not necessary to own them for a whole year. It is enough that on the day of the closing of the register of shareholders you will be on this list. The register of shareholders contains information about all holders of the company's shares. The date of formation of the register is set by the board of directors. Persons who are entitled to receive annual dividends are entitled to participate in the general meeting of shareholders. The board of directors appoints the date of convening all shareholders of the company and announces to them about the closure of the register. Thereafter, the market price of the stock is usually reduced by the amount of the dividend paid.
Step 3
In addition to common shares, many companies issue preferred ones. They tend to yield higher returns than ordinary ones, but do not give voting rights at shareholder meetings. The recommended amount of dividends on such shares is set by the owners of ordinary shares at the general meeting of shareholders. If, based on the results of the meeting, a decision is made to cancel the payment of dividends on preferred shares, then they acquire the status of ordinary shares and participate in the next voting on an equal basis with everyone else. As soon as dividends on preferred shares are paid, they lose their voting rights again.
Step 4
The level of dividends received depends on the company's dividend policy. Some of them give the majority of the generated profits to shareholders, others have not paid dividends for years. It all depends on the level of profitability of the company, the industry where it operates, and the duration of the activity. Newly created enterprises direct all profits to business expansion and development. High dividends can be expected from stable operating companies that do not plan to expand their activities in the near future.
