Let's today to know something about Dividend...... A dividend is an extra income to dividend holder which totally tax-free in hands of Receiver which is considered the source of income.
3. A dividend is the share of profits and retained earnings a
company pays out to its shareholders. When a company
generates a profit and accumulates retained earnings,
those earnings can be either reinvested in the business or
paid out to shareholders as a dividend. The annual dividend
per share divided by the share price is the dividend yield.
A share of the after-tax profit of a company, distributed to
its shareholders according to the number and class of
shares held by them.
Smaller companies typically distribute dividends at the end
of an accounting year, whereas larger, publicly held
companies usually distribute it every quarter. The amount
and timing of the dividend is decided by the board of
directors, who also determine whether it is paid out of
current earnings or the past earnings kept as reserve.
4. 1.Cash Dividend:-This is the most common type of
dividend under which there is the actual payment of
the cash by the company to its shareholders directly.
Generally, the shareholder’s payment is done
electronically but the same may be given in the form of
cash or check.
2.Stock Dividend:-This is the type of dividend under
which the company issues the common stock to
the present common shareholders without taking any
form of consideration. The treatment of the stock
dividend depends on the percentage of an issue with
respect to the number of the total previous share
issue.
5. 3.Property Dividend:-Rather than giving a cash dividend or
stock dividend to the investors, the company may give a non-
monetary dividend. The company, in that case, has to record
the distribution of non-monetary dividend at distributed asset’s
fair market value. In case the fair market value of the assets
distributed is different from the book value of assets then the
company has to record the variance in form of the gain or loss
as applicable in the case.
4.Scrip Dividend:-This is the type of dividend under which the
Company issues the scrip dividend in a case as per the
situation it is prevailing that in near future company might not
have sufficient funds for issuing the dividends. Thus this type
of dividend is a promissory note to pay the shareholders of the
company at the later date. This scrip dividend creates the note
payable which may include interest or may not include.
6. 5.Liquidating Dividend:- This type of dividend is
where the originally contributed capital is returned
back to the shareholders mainly at the time of shutting
down of the business.
6.Bond Dividend:-The Bond Dividends are similar to
the scrip dividends, but the only difference is that they
carry longer maturity period and bears interest. As in
scrip dividends, dividends are not paid immediately in
bond-dividends; instead company promises to pay
dividends at future date and to that effect issues
bonds to stockholders in place of cash. The purpose of
both bond and scrip dividends is alike which postpone
of dividend payment.