Types of dividends distributed by companies

  

Date Posted: 9/2/2012 1:23:16 AM

Posted By: moff J  Membership Level: Silver  Total Points: 485

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A dividend is a return on shareholders' investment that is given by companies to maximize the wealth of its shareholders and maintain investor confidence in the company. There are four main types of dividends that a company can issue:

1. Cash dividends- these are dividends payable in terms of cash. It is the most common type of dividend.

2. Property Dividends- these are dividends that are in the form of other assets other than cash. They could be in the form of bonds, treasury bills, or shares in other companies. These dividends are recognized at their fair value when being distributed to the shareholders.

3. Stock Dividends- the company issues additional shares on a prorata basis without receiving any consideration. These dividends increase a shareholders stock share in a company. From the company's perspective, these stocks assist the company to capitalize some of its earnings.

4. Liquidating dividends- these dividends reduce the additional paid in capital of a company. They are issued from the capital reserves. In Kenya, it is illegal to issue such dividends unless the company is being liquidated.

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