dividend types

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Post on 11-Nov-2014



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  • 2. DIVIDENDS AND ITS TYPES Dividend is a portion of the company's earnings to be distributed to its shareholders, based on board of directors' decision. Dividends are quoted as Dividend Per Share (DPS) or dividend yield. Most companies having stable and secure growth offer dividends when their share prices become stagnant. However several companies do not offer dividends as all profits are reinvested to ensure faster, better-than- average growth.
  • 3. Continued.. The board of directors decides the percentage ofthe profitto be distributed as dividends. Dividends are issued quarterly or annually. Dividends are declared by the board of directors each time they are paid. There are three important Dividend Related dates. Declaration date, date of record and payment date.
  • 4. CASH DIVIDEND The Cash dividend is by far the most common of the dividend types used. On thedateof declaration, theboard of directorsresolves to pay a certain dividend amount in cash. It is paid to thoseinvestorsholding the company's stock on a specific date.
  • 5. CASH DIVIDEND Thedate of recordis the date on which dividends are assigned to the holders of the company's stock. On thedate of payment, the company issues dividend payments.
  • 6. STOCK DIVIDEND A Stock dividend is the issuance by a company of its common stock. It is issued to its common shareholders without any consideration. If the company issues less than 25 percent of the total number of previously outstanding shares, you treat the transaction as astock dividend. If the transaction is for a greater proportion of the previously outstanding shares, then treat the transaction as a"stock split"
  • 7. STOCK DIVIDEND To record a stock dividend, transfer fromretained earningsto the capital stock And additional paid-in capital accounts an amount equal to thefair valueof the additional shares issued. The fair value of the additional shares issued is based on their fair market value when the dividend is declared.
  • 8. PROPERTY DIVIDEND A company may issue a non-monetary dividend to investors, rather than making a cash or stock payment. You record this distribution at the fair market value of the assets distributed. Since the fair market value is likely to vary somewhat from thebook value of the assets, the company will likely record the variance as a gain or loss.
  • 9. SCRIP DIVIDEND A company may not have sufficient funds to issue dividends in the near future. So, instead it issues a scrip dividend, which is essentially a promissory note (which may or may not includeinterest. It is paid to the shareholders at a later date. This dividend creates a note payable.
  • 10. LIQUIDATING DIVIDEND When the board of directors wishes to return the capital originally contributed by shareholders as a dividend, it is called a liquidating dividend. And it may be a precursor to shutting down the business. The accounting for a liquidating dividend is similar to the entries for a cash dividend. Except that the funds are considered to come from the additional paid-in capital account.


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