Dividend could be explained as the payment that a particular business entity makes to the people who hold shares of the company. The amount of dividend paid by a company is often the main reason as to why the people buy shares of the company.
Description of Paying Dividends
If a company is paying dividends then it cannot be said that the company is spending any money. On the contrary the process of paying dividends to the shareholders has often been described as a system of allotting the profits by a company to its various shareholders.
The dividends are normally provided to shareholders if a company makes profit. Often it has been seen that the companies are keeping a certain part of profits that they have made and are providing the rest of it in the form of dividends to the shareholders.
Payment of Dividends
Different types of companies pay their dividends at different times. However, the business organizations that are publicly traded normally provide their dividends at a date, which is specified.
The special dividends are provided by the publicly-traded business entities. These are normally announced at any given point of time. They are called special dividends in order to differentiate them from the normal dividends.
Forms of Payment of Dividends
There are different ways in which a company may pay its dividends:
Important Dates of Dividends
In case of dividends the following dates are of immense importance:
Advantages Provided to Shareholders by Dividends
The shareholders receive a number of benefits from the dividends:
The shareholders who have preferred shares normally go for regular share dividends. The main reason behind this is that the regular share dividends act as buffers that can be used prior to their own dividends.
Most of the shareholders have certain personal cash needs. They normally want to invest in companies whose dividend structure is suitable for them.
Dividend Reinvestment Plans
The dividend reinvestment plans are provided by some business entities. As per the dividend reinvestment plans the shareholders can buy a few shares. The biggest advantages of these plans are that the shareholders can buy the shares at lesser prices and without paying any extra charge.
Last Updated on : 27th June 2013