Glossary

Cash Dividends

Cash dividends are those paid out in form of "real cash." It is a form of investment interest/income and are taxable in the year they are paid. It is the most common method of sharing corporate profits.

Declaration Date

The declaration date is the day the Board of Director’s announces their intention to pay a dividend. On this day, the company creates a liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date. Dividends must be declared (i.e., approved) by a company’s Board of Directors each time they are paid.

Date of Record

Shareholders who properly registered their ownership on or before this date will receive the dividend. Shareholders who are not registered as of this date will not receive the dividend. Registration in most countries is essentially automatic for shares purchased before the ex-dividend date.

Dividend

The name comes from the arithmetic operation of division if a / b = c (where a is the dividend, b the divisor, and c the quotient).

In the United States, credit unions generally use the term "dividends" to refer to interest payments they make to depositors. These are not dividends in the normal sense and are not taxed as such; they are just interest payments. Credit unions call them dividends since, as credit unions are owned by their members, interest payments are effectively payments to owners.

In the United Kingdom, consumer co-operative societies use the term "dividend" for profit-sharing payments to their members. Unlike joint stock company dividends, these payments are made in proportion to a members' spending with the co-operative society, not the number of shares they hold in it.

Dividend Reinvestment Plan (DRIPS)

Plans that allow shareholders to use dividends to systematically buy small amounts of stock, often at no commission. In some cases the shareholder might not need to pay taxes on these re-invested dividends, but in most cases they do.

Ex Dividend Date

The ex dividend date is set by the exchange where the stock is traded, several days (usually two) before the date of record, so that all trades made on previous dates can be properly settled and the shareholder list on the date of record will accurately reflect the current owners. Purchasers buying before the ex-dividend date will receive the dividend. The stock is said to trade cum dividend on these dates. Purchasers buying on the ex-dividend date or after will not receive the dividend. The stock trades ex-dividend on these dates.

Payment Date

The date when the dividend cheques will actually be mailed to the shareholders of a company. Dividends or property dividends in specie are those paid out in form of assets from the issuing corporation, or other corporation (eg its subsidiary corporation). Property dividends are usually paid in the form of products or services provided by the corporation. When paying property dividends, the corporation will often use securities of other companies owned by the issuer.

Stock Dividends

Stock or Scrip dividends are those paid out in form of additional stock shares of the issuing corporation, or other corporation (eg its subsidiary corporation). They are usually issued in proportion to shares owned (eg for every 100 shares of stock owned, 5% stock dividend will yield 5 extra shares). This is very similar to a stock split in that it increases the total number of shares while lowering the price of each share and does not change the market capitalization.

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