Dividends represent a part of the profits of the company of shareholders, which is paid to them according to the decision of the general shareholders meeting on issued shares. It can also be said that a dividend is a kind of income of a shareholder transferred by a shareholders meeting in the established manner.
The profit of the meeting of shareholders, which paid deductions to mandatory funds and taxes to the state, is used in several ways - to pay dividends and to expand the activities of the joint-stock company. The size of dividend payments is determined based on the results of the joint-stock company. In another way, one can say that the amount of dividends depends on the amount of profit that has passed the dividend policy. The first half of the dividend profit is accrued on the profit for the company, and the second half of the profit goes to the needs of the joint-stock company. When a joint-stock company is actively developing, the profit of dividends will not be very large.
The general meeting of shareholders determines the fact of which dividends and in what amount will be paid to shareholders. But, dividends, that is, their size, cannot be increased by the meeting of shareholders.
It can also be said that dividends are net profit that comes per share from a joint stock company at the conclusion of the current year. Dividends are distributed among the shareholders themselves in accordance with the type and category of shares. Profit can be determined both in banknotes and in percentages, but dividends cannot be large, which is recommended by the board of directors.
Dividends paid by a joint-stock company can be classified according to several characteristics - preference and ordinary shares. Ordinary shares, in turn, perform the following functions:
- Certificate of participation in the joint-stock company and the provision of voting rights;
- Allowing the right to receive dividends themselves, as well as some part of the company's property, if the joint-stock company is liquidated.
Preferred shares offer the following benefits:
- Their owners receive the income of JSC first;
- If the joint-stock company is liquidated, the shareholders receive the right to receive part of the property of the joint-stock company in accordance with the share expressed in the value of the shares.
Dividends are accrued and paid on those shares that are directly in the hands of the shareholder and, moreover, are fully paid for by him. The amount of dividend payment may be either full or partial. For example, Gazprom dividends are paid in accordance with the dividend policy, and their size is about 25% of Gazprom’s total profit. Much earlier, the size of such a concept as dividend payment was approximately 17.5%.
Dividends are not accrued on those shares that:
- Not issued or not placed;
- Acquired but on the balance sheet of a joint stock company as a result of a decision of the board of directors;
- Repurchased shares, but located on the balance sheet of the company by decision of the board of directors;
- Shares that were received at the disposal of the joint stock company due to non-fulfillment of obligations of the buyer of shares
Dividends are paid in cash, other property, own shares or subsidiary shares. The term for dividend payment is determined by the charter of the meeting of shareholders. The joint-stock company is subject to taxation. When paying dividends, the company directly withholds taxes. Dividend recipients can be both shareholders and nominal holders of shares that are entered in the register of a joint stock company in the specified manner. If a nominal holder of shares is listed in the register, he shall be liable for the dividends transferred to him.