Dividends are a part of a company’s profits that it divides between its shareholders. In other words, a company that issues securities may pay a portion of the profits from its activities to the owners of its shares in proportion to the number of shares held by a particular citizen. To say with certainty whether the joint-stock company will pay dividends in a certain year is difficult; it is important to remember that:
Dividends are fickle, if the company has suffered losses as a result of the fiscal year, then most likely shareholders will not receive any profit either. But even in the event that the year was completed successfully and the profit was received, the board of directors may not distribute it to investors.
More about dividends
Incidentally, there are plenty of such cases if the company decides that the profit is necessary for it for the faster development that it needs now to surpass or be on par with its competitors, then all the funds received are invested in the business, that is, they are reinvested. Many large companies represented today in the market began to take into account the interests of shareholders only after they took place on the market. Microsoft, the world leader in software development, paid its first dividends only in 2003, that is, 27 years after its creation.
How can I receive dividends?
Any citizen can receive dividends if he owned shares on the day of closing the register of shareholders (I wrote about this in more detail in the article “How to receive dividends”). Thus, you do not have to wait for several months, if you still decide to receive income in the form of divided profits.
How much can I earn?
In The U.S.A, the amount of dividends paid by large joint-stock companies is small. The largest amount of dividends is paid by large oil companies (for example, Bashneft’s dividends). Although, it should be noted that some large corporations have changed their dividend policy in a more attractive direction for investors.
Companies paying dividends
In the American economy, there is a certain number of companies that constantly act in the interests of the holders of securities. Over the past 5 years, Lukoil, Rosneft, and Novatek have been steadily raising their dividends. Among the companies that consistently pay to shareholders a part of their profit from year to year are Gazprom, Aeroflot, Transneft, VTB, Sberbank, Gazprom Neft, Surgutneftegaz, Rostelecom, MTS, Tatneft and many others (see “dividends 2012” ).
What are the dividends?
There are several grounds for classifications. Dividends on preferred shares are generally higher, and besides, the presence of several types of shares in one issuer affects the order of payment of dividends. Dividends can be paid once a year, or several (intermediate).
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What taxes should I pay as a shareholder
If you received a profit in the form of dividends, then it is taxed on the income of individuals. For citizens of The U.S.A (residents) owning shares of domestic companies, the tax will be 9%, for non-residents – 15%. But most you do not have to pay anything for all necessary operations for you will make your broker or management company if you buy shares of the investment fund.
Making investments in securities as a competent investor, you, first of all, should evaluate the potential for growth in the value of shares and only then look at the size of the profit divided between investors. With a skillful selection of shares, the price of the shares of your chosen issuer will grow quite quickly and will block the income from dividends that you could receive from the shares of some other company.
Important dates for shareholders
The announcement date is the day the board of directors determines the desired amount of payments. The closing date of the register is the day on which the list of shareholders entitled to receive part of the profits should be drawn up, that is, the owners of the shares registered in the register of shareholders will receive dividends.
The ex-dividend date is the day, in which and after which the shares are sold without the right to receive dividends on them.
The date of payment is the number when the shareholder receives the reward due to him.
By the way, about the shareholders meeting – you do not need to attend it unless of course, you own a large part of the corporation’s shares (which is rare) since the minority shareholder cannot in any way influence the company’s policy and its future actions. By the dates of register closureThe decision on payment of annual dividends cannot be taken in the following cases:
- Incomplete payment of share capital
- Not meeting the requirements for the size of net assets
- All shares are not redeemed if required by shareholders
- In case of payment, there is a danger of bankruptcy of the enterprise
Is it possible to determine the future amount of dividends?
It is difficult to say exactly what the number of dividends will be next year, as this is to some extent insider information, and companies do not always seek to disclose it. Nevertheless, on the basis of rather complicated calculations, which analysts are engaged in, you can calculate their approximate size.
Terms of payment of annual dividends
The terms of payments can be fixed both in the charter of an open joint-stock company (OJSC) and be adopted at a general meeting of shareholders. In the event that this period is not stipulated, payment of dividends must occur no later than 60 days after the decision on payment was made. If the decision on payment is accepted, the company becomes obliged to pay them. However, according to the Federal Law “On Joint Stock Companies,” a company cannot pay part of its profits to shareholders if at the time of payment:
- the company has some signs of bankruptcy (or they will appear after payment)
- the value of the net assets of the OJSC is less than the amount of the authorized capital, the size of the reserve fund and the difference between the value of preferred shares placed on the exchange that must be prescribed in the charter and their nominal value or this value will be less than the above amount in case of dividend payment.
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