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DIVIDEND (Lat. dividendum, a thing to...
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See also:DIVIDEND (See also:Lat. dividendum, a thing to be divided) , the See also:net profit periodically divisible among the proprietors of a See also:joint-stock See also:company in proportion to their respective holdings of its See also:capital. Dividend is not See also:interest, although the word dividend is frequently applied to payments of interest; and a failure to pay dividends to shareholders does not, like a failure to pay interest on borrowed See also:money, See also:lay a company open to being declared bankrupt. In See also:bankruptcy a dividend is the proportionate See also:share of the proceeds of the debtor's See also:estate received by a creditor. In See also:England, the Companies See also:Act 1862 provided that no dividend should be payable except out of the profits arising from the business of the company, but, in the See also:case of companies incorporated by See also:special act of See also:parliament for the construction of See also:railways and other public See also:works which cannot be completed for a considerable See also:time, it is sometimes provided that interest may during construction be paid to the subscribers for shares out of capital. Dividends (excluding occasional distributions in the See also:form of shares) are ordinarily payable in See also:cash. Most companies See also:divide their capital into at least two classes, called " preference " shares and " See also:ordinary " shares, of which the former are entitled out of the profits of the company to a preferential dividend at a fixed See also:rate, and the latter to whatever remains after See also:payment of the preferential dividend and any fixed charges. Before, however, a dividend is paid, a See also:part of the profits is often carried to a " reserve fund." The dividend on preference shares is either " cumulative " or contingent on the profits of each See also:separate See also:year or See also:half year. When cumulative, if the profits of any one year are insufficient to pay it in full, the deficiency has to be made See also:good out of subsequent profits. A cumulative preferential dividend is sometimes said to be " guaranteed," and preferential dividends payable by all See also:English companies registered under the Companies Acts 1862 to 19o8 are cumulative unless stipulated to be otherwise. Certain public companies are forbidden by parliament to pay dividends in excess of a prescribed maximum rate, but this restriction has been happily modified in some instances, notably in the case of See also:gas companies, by the institution of a sliding See also:scale, under which a gas company may so regulate the See also:price of gas to be charged to consumers that any reduction of an authorized See also:standard price entitles the company to make a proportionate increase of the authorized dividend, and any increase above the standard price involves a proportionate decrease of dividend. Dividends are usually declared yearly or half-yearly; and before any dividend can be paid it is, as a See also:rule, necessary for the See also:directors to submit to the shareholders, at a See also:general See also:meeting called for the purpose, the accounts of the company, with a See also:report by the directors on its position and their recommendation as to the rate of the proposed dividend. The articles of association of a company usually provide that the shareholders may accept the director's recommendation as to dividend or may declare a See also:lower one, but may not declare a higher one than the directors recommend. Directors frequently have See also:power to pay on See also:account of the dividend for the year, without consulting the shareholders, an "See also:interim dividend," which on ordinary shares is generally at a much lower rate than the final or See also:regular dividend. An exceptionally high dividend is often distributed in the shape of a dividend at the usual rate supplemented by an additional dividend or " See also:bonus." Payment of dividends is made by means of cheques sent by See also:post, called " dividend warrants." All dividends are subject to income-tax, and by most companies dividends are paid " less income-tax," in which case the tax is deducted from the amount of dividend payable to each proprietor. When paid without such See also:deduction a dividend is said to be " See also:free of income-tax." In the latter case, however, the company has to make See also:provision for payment of the tax before declaring the dividend, and the amount of its divisible profits and the rate of dividend which it is able to declare are consequently to that extent reduced. In respect of See also:consols and certain other securities, holders of amounts of less than £r000 may instruct the See also:Bank of England or Bank of See also:Ireland to receive and invest their dividends. With few exceptions, the prices of securities dealt in on the See also:London Stock See also:Exchange include any accruing dividend not paid up to the date of See also:purchase. At a certain See also:day, after the dividend is declared, the stock or share is dealt in on the Stock Exchange, as ex dividend (or "x. d."), which means that the current dividend is paid not to the buyer but to the previous holder, and the price of the stock is lower to that extent. The expression " cum dividend " is used to signify that the price of the See also:security dealt in includes a dividend which, in the See also:absence of any stipulation, might be supposed to belong to the seller of the security. On the New See also:York Stock Exchange the invariable practice is to sell stock with the " dividend on " until the company's books are closed, after which it is usually sold " ex dividend." (S. D. Additional information and CommentsThere are no comments yet for this article.
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