Companies that earn a profit can do one of three things: pay that profit out to shareholders, reinvest it in the business through expansion, debt reduction or share repurchases, or both. When a portion of the profit is paid out to shareholders, the payment is known as a dividend. During the first part of the twentieth century, dividends were the primary reason investors purchased stock. It was literally said on Wall Street, "the purpose of a company is to pay dividends".
Today, the investor's view is a bit more refined; it could be stated, instead, as, "the purpose of a company is to increase my wealth." Indeed, today's investor looks to dividends and capital gains as a source of increase. Microsoft, for example, did not pay a dividend until it had already become a $ 350 billion company, long after making the company's founders and long-term shareholders multi-millionaires or billionaires. The Process Dividends must be declared (ie, approved) by a company's Board of Directors each time they are paid. There are three important dates to remember regarding dividends. * Declaration date: The declaration date is the day the Board of Director's announces their intention to pay a dividend. On this day, the company creates a liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.
* Date of record: This date is also known as "ex-dividend" date. It is the day upon which the stockholders of record are entitled to the upcoming dividend payment. According to Barron's, a stock will usually begin trading ex-dividend or ex-rights the fourth business day before the payment date. In other words, only the owners of the shares on or before that date will receive the dividend. If you purchased shares of Coca-Cola after the ex-dividend date, you would not receive its upcoming dividend payment; the investor from whom you purchased your shares would. * Payment date: This is the date the dividend will actually be given to the shareholders of company. A vast majority of dividends are paid four times a year on a quarterly basis. This means that when an investor sees that Coca-Cola pays an $ 0.88 dividend, he will actually receive $ 0.22 per share four times a year. Some companies, such as McDonald's, pay dividends on an annual basis.
All dividends
Companies that profit can do one of three things: pay that profit to shareholders, to reinvest in its business through expansion, debt reduction or share repurchases, or both. As part of the profit paid to shareholders, the payment is called a dividend.
During the first part of the twentieth century, dividends were the main reason investors bought stocks. He literally said on Wall Street, the company's mission is to pay dividends. " Today, an investor finds a little bit better, it may be, however, as the goal is to increase my wealth. " Indeed, today's investor is counting on dividends and capital gains as a source of growth. Microsoft, for example, do not pay dividends until it has become a $ 350 billion company, long after the founders and long-term shareholders of the multi-millionaires and billionaires.
Process
Dividends must be declared (eg, approved) in the company, the board of directors, each time they were paid. There are three important dates to remember about dividends.
* Declaration Date: Announcement of the date of the day the Board of Directors announces its intention to pay dividends. On this day, the company creates a liability for his book, he now must be the money of shareholders. To date, the declaration, the Council will also announce the date of registration and the date of payment.
* Entry Date: This date is also known as the "ex-dividend date. On this day, at which shareholders of record are eligible for the upcoming dividend payment. According to Barron's, shares tend to begin trading ex-dividend or ex-rights fourth day until the date of payment. In other words, only the owners of the shares not later than that date will receive dividends. If you bought shares of Coca-Cola after the ex-dividend date, you will not receive its upcoming dividend payment, an investor from whom you purchased your shares be.
* Payment Date: This is actually the date of dividend will be paid to shareholders.
The vast majority of dividends paid out four times a year on a quarterly basis. This means that when an investor sees that the Coca-Cola pays $ 0.88 dividend, he will receive $ 0.22 per share to four times a year. Some companies, such as McDonald's, to pay dividends on an annual basis.
All About Dividends
Labels: Investment