dividends

(noun)

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Related Terms

  • S corporation
  • C Corporations
  • shareholder

Examples of dividends in the following topics:

  • Performance per Share

    • Valuation ratios describe the value of shares to shareholders, and include the EPS ratio, the P/E ratio, and the dividend yield ratio.
    • The dividend yield or the dividend-price ratio of a share is the company's total annual dividend payments divided by its market capitalization—or the dividend per share, divided by the price per share.
    • Current Dividend Yield = Most Recent Full Year Dividend / Current Share Price.
    • Dividend Payout ratio shows the portion of earnings distributed to stockholders.
    • Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends: Dividend Payout Ratio = Dividends / Net Income for the Same Period.
  • Disadvantages of Corporations

    • It is decided that $500,000 will be distributed as dividends and the dividend tax is 10%, so you will lose a further $50,000 to the government when you file your personal taxes.
    • This is the concept of double taxation: first the company was taxed for its profits, and later shareholders were taxed for their dividends.
    • In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate.
    • One solution to this (as in the case of the Australian and UK tax systems) is for the recipient of the dividend to be entitled to a tax credit, which addresses the fact that the profits represented by the dividend have already been taxed.
    • In other systems, dividends are taxed at a lower rate than other income (for example, in the US) or shareholders are taxed directly on the corporation's profits and dividends are not taxed.
  • For-profit marketing versus nonprofit marketing

    • For-profit marketers measure success in terms of profitability and their ability to pay dividends or pay back loans.
  • Types of Corporations

    • Any distribution from the earnings and profits of a C corporation is treated as a dividend for U.S. income tax purposes.
    • Exceptions apply to treat certain distributions as made in exchange for stock rather than as dividends.
    • A nonprofit organization is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends.
  • Net Income

    • The items deducted will typically include tax expense, financing expense (interest expense), and minority interest.Likewise, preferred stock dividends will be subtracted too, though they are not an expense.
    • Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings.
  • Equity Finance

    • Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.
    • The purchase of one share entitles the owner of that share to literally share in the ownership of the company, a fraction of the decision-making power, and potentially a fraction of the profits, which the company may issue as dividends.
    • From the perspective of capital providers, lenders seek to be rewarded with interest and equity investors seek dividends and/or appreciation in the value of their investment (capital gain).
  • Direct and Indirect Measurement

    • Financial items in the indirect method include dividends, stock repurchases, and changes in overall debt.
  • Nonprofit Organizations (NPOs)

    • A nonprofit organization is an organization that uses surplus revenues to achieve goals rather than to distribute them as profit or dividends.
    • A nonprofit organization (NPO) is an organization that uses surplus revenues to achieve its goals rather than to distribute them as profit or dividends.
  • Revenues

    • Some companies receive revenue from interest, dividends or royalties paid to them by other companies.
  • Alternate Sources of Funds

Subjects
  • Accounting
  • Algebra
  • Art History
  • Biology
  • Business
  • Calculus
  • Chemistry
  • Communications
  • Economics
  • Finance
  • Management
  • Marketing
  • Microbiology
  • Physics
  • Physiology
  • Political Science
  • Psychology
  • Sociology
  • Statistics
  • U.S. History
  • World History
  • Writing

Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.