Dividends: What are they? Definition | Hapinary Dictionary

Hapinary Dictionary

9.11.2024 1:01 AM

Dividends: Definition and Meaning

Dividends are distributions of profits that a corporation decides to share with its shareholders.

Characteristics of Dividends

  • Being a shareholder gives you the economic right to receive dividends, at least in general terms;
  • When a company has profits or surplus cash, it decides to distribute a percentage according to its dividend policy;
  • Dividends can be paid based on a fixed, variable, or mixed rate;
  • They may be paid at a specific period or the company may choose not to pay dividends and use all resources for reinvestment to improve the business;
  • If a dividend or profit is not distributed, it remains within the company to be used for improving its operations.

How to Determine How Much Dividends a Stock Pays?

To determine how much dividends a stock will yield, there is a formula to calculate the DPS (Dividends Per Share) based on the information provided by the company:

  • Divide the gross dividend by the number of shares,
  • Gross / Number of shares.

The Gross Dividend is the result of the percentage the company shares in its dividend policy.

In conclusion, to know how much money you'll receive in dividends from a stock, you should check the dividend yield (dividend yield) that your company provides in its policy.

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