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What is Dividend ? Types of Dividend ?

What is Dividend ? Types of Dividend ?

Published in Economy & Finance
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  • 1. FINANCIAL MANAGEMENTDIVIDEND…Dividend ? Types Of Dividend ?Factors Affecting Dividend Policy ? HARIPRASAD.S S3 . MBA ISMS
  • 2. Dividend Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders. A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. Dividends are usually paid in the form of cash.
  • 3. Types Of Dividend ?1. Cash dividend2. Stock or bonus dividend3. Scrip dividend4. Property dividend5. Bond dividend
  • 4. Cash dividend It is the normal amount paid to the shareholders at the end of the year . Distribution of cash reduces the net worth of the firm but cash paid to the shareholder only after careful cash planning of the year. Dividends which are not paid more than once in the year is called annual dividend. Dividends should be declared after the closing of the accounts of the firm.
  • 5. Stock or bonus dividend Shareholders do not always receive dividends in the form of cash, sometimes a firm issues dividend in the form of additional share, called stock/bonus dividend. It is a permanent method of capitalization of earnings. Surplus amount which is distributed in the form of stock dividends becomes a permanent investment of the company Stock dividend is also called bonus shares Shareholders are allowed to sell this stock when they received it. Stock Dividend – A payment of additional shares of stock to shareholders. Often used in place of or in addition to a cash dividend.
  • 6. Scrip dividend It is a promise to a shareholder to pay a dividend at a future date The scrip in the form of promissory note with interest It is a temporary promise given to the shareholder when the position of the firm for declaring dividends is not sound
  • 7. Property dividend Under exceptional circumstances a firm sometimes pays property dividend to a shareholder in the form of asset These are non–recurring in nature and may be once in the lifetime of the firm. The directors would usually not like to issue such a dividend
  • 8. Bond dividend Here the company issues bonds by way of dividend Sometimes the company has no sufficient fund , So the DIVIDEND paid in the form of BOND. Postponement of immediate payment of DIVIDEND in CASH. Regular interest to bond holder Payment made on due date.
  • 9. Factors Affecting Dividend1. Policy ? External factorsa. General state of the Economy Uncertain Conditions Depression Inflationa. Legal restrictions Companies Act 1956 ACT….SEVERAL RESTRICTIONS….a. Tax policy The Govt. may give tax incentives to companies ,retaining larger share of their earnings. In such a case the management may be inclined to retain a larger amount of the firm’s earnings.
  • 10. 2. Internal factorsa. Desire of the shareholders Capital Gain For getting Regular Dividendb. Financial needs of the company Chance of direct conflict between Shareholders and Financial needs of the Company To maximize Shareholders Wealth Retain only better Investment opportunities Financially sound
  • 11. c. Nature of earnings Stable Earningsd. Desire of control The desire shareholder to retain… The management to retain control over the company…e. Liquidity position CASH OUT FLOW- PAYMENT OF DIVIDENDS Insufficient Cash Resources
  • 12. Thank you….