Dividend

Dividends are payments from the company’s net profit that investors receive for owning shares.

Who Pays Dividends?

The issuing company pays dividends to its shareholders. The amount and procedure of payments are determined by the Board of Directors of the company. The final word rests with the general meeting of shareholders.

Depending on the type of shares, the shareholder has the right to participate in the shareholders’ meeting. Only holders of common shares have such a right. Preferred shareholders, on the other hand, are usually guaranteed dividend payments.

How Are Dividends Paid?

Dividends are approved at the general meeting of shareholders, which sets the date, form, and payment procedure. Preferred shareholders receive income first. The percentage of payment for such shares is usually set in the company’s charter. In case of late or delayed payments, investors can file a lawsuit to claim the dividends and demand penalties for the delay.

In case of liquidation of a joint-stock company, the common stockholders receive payments last of all.

How Is the Amount of Dividends Determined?

Dividends are usually calculated based on the company’s net profit for the fiscal year. The larger the net profit, the higher the percentage of dividends — plain and simple. The amount of dividends is distributed among the shareholders in proportion to the number of securities, and depending on the type of shares (ordinary shares or preferred shares).