Dividend
Distribution of corporate profits to shareholders, often as cash.
Last updated
Dividends are payments made to shareholders as a percentage of a company's profits.[1] The company's board of directors decides whether to pay dividends, how much they will be paid, and when.[1] The Latin term "dividendum," meaning "thing to be divided," is the origin of the word "dividend."[2]
Quick Facts
- Field
- Corporate finance and investment
- Known for
- Distribution of corporate profits to shareholders
- First recorded payer
- Dutch East India Company (VOC)
- Common form
- Cash dividends
Facts from the source article.
Key facts and history
Dividends may be paid out as cash, more shares (stock dividends), or less frequently as assets (property dividends).[1] Regular dividend payments were first recorded for a public company by the Dutch East India Company (VOC).[3] For nearly two centuries (1602–1800), the VOC distributed annual dividends that were approximately 18% of its share value.[3] Courts in common law jurisdictions have generally given directors broad discretion regarding dividend declarations and payments, avoiding intervention in company dividend policies.[4]
A departure from this precedent occurred in 2013 when the Supreme Court of New South Wales, in Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd, acknowledged a shareholder's contractual entitlement to a dividend.[4] Before any declared dividend can be paid, it requires approval from the company's board of directors.[5] A company's market capitalization remains unchanged by stock dividend distributions.[6]
What the cited sources add
The Economic Times defines dividends as payments made to shareholders as a percentage of a company's profits.[1] Dividends are not shown as an expense on financial statements and are usually paid from net profits or retained earnings.[1] Not all businesses pay dividends; new businesses frequently reinvest their profits for expansion rather than giving them to shareholders.[1] In India, if a person's dividend income surpasses ₹5,000 during a fiscal year, it is subject to their applicable income tax slab rates.[1]
The Dividend Distribution Tax (DDT) was eliminated in India in April 2020, resulting in individual dividend taxation.[1] According to the UK Companies Act 2006, distributions are permitted only from a company's accumulated realized profits after subtracting its accumulated realized losses.[7][8]
References
- "Definition of 'Dividend'", The Economic Times. facts only, no text reused. economictimes.indiatimes.com
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: "dividend", Online Etymology Dictionary, 2001 (original not read by us) en.wikipedia.org
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: Freedman, Roy S.: Introduction to Financial Technology. (Academic Press, 2006, ); DK Publishing (Dorling Kindersley): The Business Book (Big Ideas Simply Explained). (2014, ); Chambers, Clem, "Who needs stock exchanges?", Mondo Visione, 14 July 2006 (original not read by us) en.wikipedia.org
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: du Plessis, "A shareholder's contractual right to a dividend and a company's oppressive conduct in withholding dividend payments: Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd", Companies and Securities Law Journal, 201 (original not read by us) en.wikipedia.org
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: "SEC.gov – Ex-Dividend Dates: When Are You Entitled to Stock and Cash Dividends", www.sec.gov (original not read by us) en.wikipedia.org
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: "Stock Splits and Stock Dividends Management", PrinciplesofAccounting.com; Chen, "Stock Dividend", Investopedia, 30 June 2023 (original not read by us) en.wikipedia.org
- UK Legislation, Companies Act 2006: Part 23, accessed 26 October 2023. facts only, no text reused. legislation.gov.uk
- Wikipedia, "Dividend" (CC BY-SA 4.0), which cites: UK Legislation, Companies Act 2006: Part 23, accessed 26 October 2023 (we also read that source) en.wikipedia.org
Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Dividend (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.
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Sources
Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.
- Wikipedia: Dividend (CC BY-SA 4.0).
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