Thursday, March 20, 2014

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The Stock Market | Dividends

Dividends are returns paid to shareholders of a company out of the profits of the company. They are paid periodically upon recommendation by the board of directors and subsequent approval by shareholders of the company at the Annual General Meeting (AGM).
Types of Payment
Dividends are payed via dividend warrants (a cheque like payment) or bonus issues and are mailed to shareholders or credited directly to their bank accounts if they had previously filled an e-dividend or e-bonus accounts with the company's registrar in which the are happen to be a shareholder.
E-dividend is an electronic transfer of dividends into a shareholder's account without relying on the physical dividend warrant. To, however enjoy the e-dividend facility a shareholder will have to fill an e-dividend authorization
form and submit it to his bank. That way the shareholder is sure to receive dividends in his own private current account.
Ex-Div Period
The Ex-Div date/period is the cut-off date for payment of dividend and also the date upon which the share price trades less the amount of dividend per share that will be paid. As such when a company declares dividends it usually accompany it  with a date of closure of register. Therefore, the shareholders that will get dividends are those that have their names on the register on or before the date of closure of register. Therefore if you make any purchase of share after the ex-div date or period' you will not be paid dividends for that period.
Types of Dividends
There are different types of dividends some of which are cash dividends or script dividends.
Cash dividends are periodically paid out of the profits of a company. Cash dividends can also be paid when the company liquidates, but this dividend will only come up after all the creditors have been settled. Bonus issues are also classified as dividends except that they are not cash payments. They are dividends issued in the form of shares to shareholders which they can now decide to sell in the Stock Exchange Market for cash.


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