To make money on the stock market, you need to have knowledge of the principles of its operation, as well as familiarize yourself with the theoretical basis. One of the main concepts that shareholders operate with is dividends.
Dividends represent part of the organization's profit, which is distributed among shareholders in proportion to the number and according to the type of shares owned by shareholders.
Dividends in simple words are payments to the shareholders of a company from the net profit of this organization. The size of the payout to an individual shareholder depends on the amount of shares he owns and whether they are preferred or common shares. Thus, dividends are a source of income for shareholders. The concept of dividends is used in joint stock companies (JSC) when it comes to the payment of income. In addition, distribution of profits in the form of dividends is also carried out in limited liability companies (LLC).
It should be noted that dividends are not considered:
Important: The word dividends is written with two letters “and”, as it comes from the Latin word dividendum - something to be divided.
Dividends are usually classified according to the following criteria:
The size of dividends depends on the profit of the JSC or LLC, as well as on the company’s dividend policy. Profits can be used to pay dividends, or can be reinvested in the business in order to increase production volumes, purchase equipment, etc.
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Typically, part of the profit is used to pay dividends, and part is used for reinvestment. The shareholders' meeting decides in what shares the income will be distributed. At the same time, recommendations on the amount of dividends are established by the board of directors, and the meeting of shareholders has no right to exceed the recommended amount.
As for specific figures, the dividend yield of large Russian companies averages 5-10%. This means that, having one share worth 100 rubles, a shareholder will receive annual dividends in the amount of 5 to 10 rubles.
The law determines different deadlines for dividend payments for joint-stock companies and limited liability companies. In the case of an LLC, they can be specified in the company’s Charter or determined by a decision of a meeting of company participants. In this case, the Charter and the decision of the meeting may not establish a specific payment date. In this case, dividends must be paid to participants no later than 60 days from the date of such decision.
As for JSC, the period for issuing dividends is counted from the date on which the composition of shareholders is determined and is limited:
According to the law, a JSC may not pay dividends in the following situations:
Dividend tax is imposed on individuals and legal entities. The rate of this tax is established by Article 284 of the Tax Code. For individuals who receive income in the form of dividends, the rate depends on whether the taxpayer is a resident of the Russian Federation or not. For residents the tax rate is 13%, for non-residents - 15%. Residents, according to the law, are persons, regardless of citizenship, who have spent 183 or more calendar days in Russia over the past 12 months.
The tax rate for legal entities is:
Advice: If you have a tax debt, but you do not know its size, you can find out the tax debt by last name.
Earnings on investments, which includes the purchase of shares, depends on the wise choice of companies in which funds will be invested. When purchasing securities, you should give preference to the most stable organizations. In the case of Russian companies, the most stable are state-owned enterprises: Gazprom, Rosneft, Sberbank, Rostelecom, etc. Shares of large state-owned companies today have the highest liquidity and resistance to economic crises.
You can gain more in-depth knowledge in the field of making money on stocks through numerous business courses. Company managers often send their employees to such events for professional development purposes. For example, the Sberbank Virtual School project was organized for Sberbank employees.
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Dividends are an important concept for those whose income is related to the purchase and sale of shares. The stock market provides excellent opportunities for people whose goal is stable passive income. In addition to the stock market, you can make money by buying and selling precious metals. To do this, you need to open an impersonal metal account, which allows you to trade gold, silver and platinum in an impersonal form.
Participants and the charter of a joint-stock or other company.
Dividends may be paid several times a year or may not be paid at all. Payment of dividends reduces capitalization and requires savings that are not allowed for reinvestment or withdrawn from it. Dividends paid before the end of the financial year are called intermediate or preliminary dividends(English) interim dividend). At the end of the financial year, payments are made final dividends(English) final dividend).
Dividends are usually paid in cash. Such dividends are called cash dividends(English) cash dividend). In addition, dividends can be paid in shares. stock dividend) or other property of the joint-stock company.
Article 43. Dividends and interest
1. A dividend is any income received by a shareholder (participant) from an organization during the distribution of profits remaining after taxation (including in the form of interest on preferred shares) on shares (interests) owned by the shareholder (participant) in proportion to the shares of shareholders (participants) in authorized (share) capital of this organization.
Dividends also include any income received from sources outside the Russian Federation that are classified as dividends in accordance with the laws of foreign countries.
The following terms do not apply to Russian specifics. Announcement date(English) declaration date) - the date when the board of directors announces the amount of dividends. Registry closing date(English) dividend record date) - the date of compilation of the list of persons entitled to receive dividends. Shareholders who are in the register of shareholders on a given day have the right to receive dividends. Ex-dividend date(English) ex-dividend date) - the date from which shares are sold without the right to receive a declared dividend. Payment date(English) payment date) - the date upon which the shareholder receives the dividends due to him.
Companies may pay less dividends than they can afford for the following reasons:
Striving for stability- the refusal to raise dividends, even when earnings and cash flow to equity (FCFE) are growing, is due to the fact that companies are not confident that they can maintain this higher level of dividends. Likewise, dividends are often left unchanged even when earnings and cash flow to equity are falling.
Investment needs- Full payment of FCFE in the form of dividends may be delayed as companies may set aside cash for unplanned investments or unforeseen needs.
Taxes- the dividend tax rate may be higher than the capital profit tax rate.
Demonstration of prospects- an increase in dividends is considered as a positive signal, a decrease - as a negative one.
Management interests- the desire for constant expansion, the need to create a cash reserve in order to survive periods of falling profits.
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Synonyms:Antonyms:
- (dividend) Distribution of part of the company’s income between its shareholders. The dividend is usually expressed as a percentage of the par value of the share. Thus, a dividend of 15% per share with a nominal value of 1 f. Art. means that… … Financial Dictionary
- (dividend) 1. Distribution of part of the company’s income between its shareholders. The dividend is usually expressed as a percentage of the par value of the share. Thus, a 15% dividend per share with a par value of £1. Art. means that … Dictionary of business terms
- (Latin, from dividere to divide). The portion of total profits that accrues to each participant in a business enterprise. Dictionary of foreign words included in the Russian language. Chudinov A.N., 1910. DIVIDEND annual profit attributable to ... Dictionary of foreign words of the Russian language
dividend- a, m. dividende f., German. Dividende lat. dividendum is what is to be divided. 1. Part of the profit of a joint-stock company, distributed annually among shareholders in proportion to the invested capital. BAS 2. Dividend or dividend. comm. IN… … Historical Dictionary of Gallicisms of the Russian Language
Cm … Synonym dictionary
- (dividend) Payment of income by a company to shareholders. Shareholder income is called dividends due to the fact that the company is legally obliged to divide (English divide.) any amount to be distributed among shareholders in proportion to the number... ... Economic dictionary
- (from Latin dividendum that which must be divided) 1) part of the net profit of a joint-stock company after taxation, paid to shareholders in money, shares, property and other securities; on ordinary shares (with voting rights)… … Legal dictionary
- (from the Latin dividendum that which must be divided), income periodically paid to shareholders on their shares from the profits of a joint-stock company ... Modern encyclopedia
- (from the Latin dividendum, something to be divided), income periodically (usually annually) paid to shareholders for each share from the profits of a joint-stock company... Big Encyclopedic Dictionary
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In this article we will talk about such a concept in the world of securities as “dividends”. Let's find out what they are, how to get them and how much you can earn from it. The article is written in simple words and is aimed at novice investors.
Dividends(from the English "dividend") is a payment of a percentage of the company's profit for each share to its holders. How much money to spend on payment is determined at the general annual meeting of shareholders of the company. Most often, payments occur once a year.
Since dividends are paid per share, the higher the number, the greater the profit in absolute terms.
The size of the payment is determined at a meeting of shareholders, where any investor owning shares of this company can be present. Moreover, even those who own at least one have the opportunity to participate in the meeting. Their number only affects the number of votes that a meeting participant will have.
Meetings of shareholders do not always decide to pay dividends. A joint decision can be made that all money should be reinvested in the development of the company. Plus, there is not always a profit at the end of the year. If the company operated at a loss, then naturally they will not pay anything for this year.
In Russia, the average dividend yield is within 1-7% per share of its value (for 2019, the average for the MICEX stock index is 6.55%). Typically, the more reliable the company, the lower the percentage paid. Traditionally, companies from the telecoms, metals mining and electricity sectors pay the most.
The average dividend values in Russia by sector of the MICEX index for 2019 are as follows:
Annual dividend yield is primarily measured as a percentage rather than in absolute numbers. Therefore, sometimes $5 on one stock is more profitable than $10 on another.
For example, if company A is worth $100 and pays out $5 per share, that is - 5%. Another company "B" is worth $300 and pays $9 per share, which is - 3%. Thus, as a percentage, dividend payments are higher for company “A” than for “B”. Moreover, this difference is almost twofold.
To receive dividends for the previous year, a shareholder must own shares at the time of closing the register. This date is announced in advance and is known to everyone. Moreover, this information is usually already available at the beginning of the year.
You can own a share for at least one day at the time of closing the register and thereby receive dividends for the previous year. Thus, tenure is not important.
How many shares do you need to buy to receive dividends?The company pays a dividend for each share issued, so the number of shares in your investment portfolio only affects the total payment amount. For example, if you have 1000 pieces and each one pays 15 rubles in profit, then you will receive 15,000 rubles. After deducting income tax, we get a net 13,050 rubles.
As you know, there are two types of shares: ordinary and preferred. Their difference is that preferred shares do not have the right to vote at the meeting, but they pay a larger dividend percentage and have first priority for payments. You can read more about the differences in the article:
Dividend payments are made to one of the following accounts:
They have the best trading conditions. By the way, here you can open a convenient IIS account, which allows you to receive tax deductions from the top-up amount. The maximum annual refund amount is 52 thousand rubles (13% of 400 thousand rubles).
Detailed instructions for buying shares with examples can be found in the following articles:
How to value two companies based on dividend payments? There is an indicator for this " dividend stability index" (DSI), which reflects two important criteria at once: stability of payment and stability of the increase in absolute payment from year to year.
DSI = /14
The DSI value ranges from 0 to 1. The values can be interpreted as follows:
Typically in Russia dividends are paid once a year. Traditionally, the closure of the register for most companies occurs between April and July. This means that those who held shares at the time of closure of the register will receive dividend profit. Most often, the market approaches the cut-off dates and shows positive dynamics.
According to the law, dividends can be paid more often. Those paid before the end of the financial year are called interim or preliminary dividends. For example, once a quarter. Rarely, but there are additional payments. For example, the companies Lukoil, Rosneft, Severstal, and MTS did this.
At the end of the financial year, final dividends are paid.
When will dividends on shares arrive?Dividend payments by law must occur no later than 60 days from the date of announcement of payments. But many issuers pay them within 30 days.
Those investors who hope to get into the register, and the next day sell shares and make a profit out of the blue, are very mistaken. The stock will open with a gap down exactly by the amount of dividends. This gap is called a “dividend gap.” In most cases, prices recover to their usual values after 2-3 months.
For example, if a share cost 214 rubles at closing, and the dividends on it are 12 rubles, then most likely the opening of the next day will be in the region of 202-203 rubles.
Theoretically, you can live only on profits from dividends, but this will require you to have solid capital in the stock market. Focusing on only one source of income is extremely risky. For example, payments may not be made in some year due to a strong drop in profits. During crises, such a period can drag on for several years in a row. Everything depends on the success of the business and decisions at the shareholders meeting.
As with any profit, dividends are subject to income tax of 13% (personal income tax). For individuals, the tax amount is withheld automatically. Payments occur after deducting it.
To live off dividends, you need to invest money in shares of companies that have a high DSI index. It would also be a good idea to study the dynamics of payments over several previous years. As a rule, large companies rarely change their dividend policy.
As I noted above, most often solid dividends are paid by shares of oil and gas companies (Gazprom, Rosneft, Surgutneftegaz, Tatneft, Novatek). Metallurgists also have good payments (MMC Norilsk Nickel, Severstal, NMLK, MMK). The most stable payments are considered to be payments from utility companies (Enel Russia, IDGC, Rossetti) and telecoms (MTS, Rostelecom). But the situation changes every year. It is possible that next year, for example, the financial and construction sectors will show substantial payments.
Shares of companies that pay consistently high dividend payments are called. They attract great interest from large investors and usually rise in price more steadily.
Each holder of securities issued by commercial entities regularly receives dividends. The amount of funds received depends on the performance of a particular organization. In addition, it is necessary to take into account the specifics of the dividend policy chosen by the business entity. In this article we will try to answer the question of what dividends are in simple words, and also consider the features of the process of calculating these payments.
Dividends are the share of profits that a company distributes to shareholdersPeople in the investment business often purchase various stocks. When concluding such transactions, both the value of the shares themselves and the amount of regular payments in the form of dividends are taken into account. Shares, like other securities, are the financial basis of an enterprise. A person who owns securities is considered a business owner. This means that the shareholder has a legal right to receive a share of the company's profits.
The word “dividend” came into Russian from Latin and literally means an object that can be divided into several parts. In simple terms, dividends are the payment of a certain percentage of a company's income as a reward for investments made.
The amount of these payments depends on the number of shares the holder has and the financial policy of the enterprise.
The profit received by the organization as a result of business activities is redirected to several different areas. A portion of the money received is used to cover monthly expenses and debt obligations. The second part is used for further business development. The remaining money is distributed among the business owners, which include all founders and shareholders. The size of the share is determined by the number of shares, their type and size of the total share. It is important to note that not all companies make such payments. As a rule, such a financial policy is used by large corporations, where there is a slow increase in the value of shares (Apple, Intel, Gazprom).
Young enterprises at the beginning of their development do not make payments on securities. In this case, all income received by the company is redirected to its further development. This approach allows you to significantly increase the business rating, expressed in the form of growth dynamics in the value of issued shares.
Most global companies use two types of shares: preferred and standard shares. Owners of standard shares are given the status of co-owners of the business. Having this status allows you to take part in meetings of the founding council. People who own such a block of shares have voting rights, which means they partially control the course of the company's development. In addition to all of the above, these people are entitled to a certain share of the profits. Preferred shares provide the opportunity to receive dividends. However, owners of these securities do not receive the status of co-owners.
It is important to note that in the event of financial difficulties, shareholders owning a preferred package of securities receive guaranteed payments. Owners of common shares in this situation may lose their payments. Each company has the right to independently decide whether to pay dividends to ordinary shareholders. When deciding this issue, the founders take into account the current financial indicators of the company.
When you buy shares of a company on a stock exchange, you are entitled to dividends on those shares for as long as you remain a shareholder When conducting investment activities, you cannot select shares for purchase based on indicators such as the amount of profit and the financial position of the selected business entity. In this case, it is necessary to take into account the number and amount of dividend payments made by a particular company over the past few years. It should be noted here that most major exchanges offer investors only a standard package of shares. However, companies recommended by brokers regularly make payments to the owners of their securities.
It is important to note that dividend payments are not made on securities that are personally owned by the organization itself or put up for auction. It should also be noted that most companies initially paid dividends in the form of shares. This means that security owners regularly received additional shares for personal ownership. Today, such a payment procedure is practically not used.
Dividends are accrued and paid in several steps V. The need to split this process into several stages is explained in the preparation of reports associated with large financial transactions. At the first stage, the company must send a notice to all shareholders containing information about the date of payment of dividends and their amount. Participants who receive such mailings are required to submit a registration application.
It should be noted that persons not registered in a special register cannot receive the payment in question. In this case, you must submit your application before the start of your next pay period. The issuance of funds is carried out within thirty days from the date of making the last entry in the register and its closure.
As we said above, owners of preferred shares are not considered business owners. This means that these persons cannot participate in the company's management board. The meeting of shareholders is initiated by the board of directors. At such events, issues are addressed on the following topics:
Dividends can be paid based on annual, half-year, quarterly results or on special occasions It is important to note that the date of opening of the register cannot be announced by the board of shareholders until the event in question is held. As a rule, two such meetings are held within one year. The period between opening and closing the register ranges from ten to twenty days. The first meeting of shareholders is held from the first of March to the thirtieth of June. This event is dedicated to issues related to the closing of the calendar year.
The holder of securities can receive payments due to him only if the day of settlement coincides with the day the register is closed. Each co-owner of the business and the company's management must send a written notice inviting them to a meeting of the board of shareholders. People who are not on this list, as a rule, do not receive such notifications.
A dividend is a way of receiving income on securities that were purchased in the past period. The amount of payments depends on the total volume of shares and their type. When making calculations, such basic indicators as the company’s profit margin and the total amount of funds allocated for distribution to shareholders are taken into account.
As an example of such calculations, consider a situation in which a company has issued one hundred thousand shares. Ten thousand shares are of the preferred type, and ninety thousand are of the ordinary type. During the reporting period, the organization in question received one billion rubles of net profit. Members of the shareholder meeting decided that two hundred million rubles would be redirected to make dividend payments. The fixed payment for one preferred share was two thousand rubles. This means that the holders of these shares will be paid an amount of twenty million rubles. The remaining funds (one hundred and eighty rubles) will be distributed among ordinary shareholders. In this case, people who are co-owners of the business will receive dividend income in the amount of two thousand rubles.
Payments of funds to individuals who own securities of a particular enterprise are made in one of those ways that are available to the shareholder. This can be either cash or bank transfer. Also, the company management can issue a postal transfer in the name of the shareholder. In the case where the securities were purchased through a brokerage agency, the company's management must make a transfer to a special trading account.
The procedure for issuing funds is regulated by current state regulations. According to the established rules, the company is given ten days to issue funds to trustees, professional market participants and nominee holders. The duration of the time period during which payment is made to the remaining participants is twenty-five days. This period begins from the moment of holding the meeting of shareholders.
How much dividends to pay and when is decided by the company’s shareholders, focusing on the recommendations of the board of directors Many people planning to get into the investment business are concerned about how dividends are taxed. According to the rules established in the Russian Federation, all types of income received by individuals and legal entities are subject to taxation. Dividends are also classified as personal income. This means that in this case the standard procedure regulated by the Tax Code is applied.
Today, the amount of tax deductions is equal to thirteen percent of the total income received. It is important to note that organizations that issue securities receive the status of tax agents. This means that tax costs are automatically withheld when dividends are issued. The owner of the shares does not need to pay taxes separately.
Most businessmen conducting investment activities rarely consider dividends as the main source of trading. Most financial transactions involving the sale of securities generate comparatively more profit than dividend payments. But if we compare dividend payments with interest payments on deposits, the latter clearly lose. A person who has invested his own capital in the purchase of securities receives the status of one of the members of the business management board. It should be mentioned here that even if the company is unprofitable, the investor has the legal right to receive dividend payments.
The profitability from owning securities is determined by the ratio between the amount of dividend compensation and the market value of the share. When making such calculations, it is necessary to take into account the percentage adjustment. To do this, you need to multiply the result by one hundred. As practice shows, expensive stocks have low dividend yields. For preferred assets, a fixed amount of payments is established. This indicator is regulated by local acts of the joint-stock company.
To receive dividends, you must be the owner of shares on a certain date - the date of registration of the register Having considered the question of how to receive dividends on shares, it is necessary to discuss the most profitable companies operating on the Russian market. It should be noted here that valuable shares of domestic corporations bring low profits. In this case, the amount of dividend payments is significantly less than the income from securities of European companies. Also, domestic shareholders can receive significantly greater profits as a result of financial transactions on the stock market. According to statistics, the dividend yield of Russian organizations varies from five to ten percent of the investment size. But most securities companies offer investors a reward of no more than five percent.
Today, there are several dozen companies operating on the Russian market that are of interest to potential investors. This category includes corporations such as: VKontakte
Recently, while discussing investing with a circle of friends, one of them stunned me with a question - what are dividends in simple words?
Honestly, I had no idea that anyone is still not familiar with this concept. It seems to me self-evident that the meaning of the term “dividends” is well known to everyone.
It turned out I was wrong and naive. Today I will try to explain in a nutshell what it is.
Typically, dictionaries define dividends as a part of a company's profits, which, after paying all taxes, is, by decision of the board of directors, distributed among shareholders in proportion to the number of shares of the corresponding categories and types they own.
This is how it really is.
Dividends are a way of rewarding investors by paying them a portion of profits. They can be expressed in the form of money, shares and even property. Cash incentives like these are why I invest in dividend stocks.
In order not to miss, you need to be sure that the company’s business is going like clockwork and profits are growing. You can study financial statements all day long, but the best way to ensure that a company is thriving is to receive a portion of its profits in the form of regular cash payments into your account.
However, not all companies return part of their earnings to shareholders.
Most developing companies, including any that are growing faster than the corresponding market, do not pay dividends. This is not explained by their greed, but by the fact that at the stage of formation and strengthening of a business, it is much more reasonable to reinvest proceeds in their own projects and thus stimulate further growth.
Disposing of profits at your own discretion can be much more profitable than attracting investors. It also helps you save on taxes by avoiding double taxation (first on corporate profits and then on dividends paid).
I prefer companies that pay dividends and increase payments annually. Because receiving dividends and their subsequent reinvestment is part of my personal financial policy. If a company cannot provide this for me, then investing in it will be a blow to my financial goals.
Once the dividend payments hit my brokerage account, I have a choice of how to use that money.
I can buy shares of the same company with them, I can reinvest in another. During periods of inflation and crisis, someone prefers to keep money at home in the form of cash, someone withdraws payments and spends them immediately, someone expects that in a couple of decades, accumulated and increased dividends will provide him with a decent life.
It doesn’t matter at all how the situation in the economy develops; I receive my share stably, I can choose how to use it and this completely suits me.
If you also want to receive dividends consistently, then you simply need to learn how to select companies that constantly increase payments.
