Dividends are one off or periodic gains that are received by shareholders of a company. They are a great way of guaranteeing yourself a regular income stream particularly if you have invested in a profit-making company. Shareholders may receive a share of the profit either monthly, every six months or annually. Most companies award their bonuses once every year. There many different types of dividend payments that exist in the city of Florida.
The most commonly issued form of bonus is cash bonus. As the name suggest, this comes in the form of cash. Each shareholder gets a proportion of the profit depending on the number of shares that they have in the company. The first step in paying the bonus is a resolution by the board of directors on what is referred to as the date of declaration. Next is the date of record on which the amount is allocated to individual shareholders. Disbursement occurs on the date of payment.
One of the advantage of a cash bonus is the fact that it transfers the economic value of a company to the shareholders. The main downside is that it results in a drop of share price by almost the same amount as the dividend issued. For instance, if 10% of cash bonus is issued, a loss of 10% on the share price is likely to be observed. Remember that the bonus is subject to tax.
A stock bonus is also fairly common. This is a bonus that comes in the form of extra shares for each share that one has. For example, a company may issue three extra shares for every share held. This means that an individual with 300 shares gets an extra one hundred shares to make a total of 400. The term stock bonus is used when the total number of shares issued is less than 25% of those held by a company.
A property bonus is a non-monetary bonus issued by a company to its shareholders. This bonus is captured in the records using the fair market value of assets that have been distributed. The market value may vary from the book value of the same property result into a profit or loss transaction. It is for this reason that some businesses opt for this kind of bonus so as to reduce their taxable income.
Scrip bonuses are issued under special circumstances. They are recommended by the board of directors when the company does not have monetary bonus to issue but is still keen on paying out at some point in the future. They work like promissory notes. The company may be planning to plow back the profits made or may not be making enough profits yet.
Liquidating bonuses are a bit rare. They are usually a one-off payment given to founding members of a company as part of their seed capital. The term is used because this type of dividend becomes necessary when there are plans to wind up a company. The accounting process involved when allocating these pay-outs follow the same principles as cash pay-outs.
Companies can issue one or several of these dividends depending on how well they are performing financially and the kind of resolutions passed by the shareholders. Potential investors use the history of dividend pay-out as one of the determinants of stability of a company. Ensuring a regular dividend pay-out is, therefore, one of the ways of attracting investment. The disadvantage of this is that retained earnings are reduced.
The most commonly issued form of bonus is cash bonus. As the name suggest, this comes in the form of cash. Each shareholder gets a proportion of the profit depending on the number of shares that they have in the company. The first step in paying the bonus is a resolution by the board of directors on what is referred to as the date of declaration. Next is the date of record on which the amount is allocated to individual shareholders. Disbursement occurs on the date of payment.
One of the advantage of a cash bonus is the fact that it transfers the economic value of a company to the shareholders. The main downside is that it results in a drop of share price by almost the same amount as the dividend issued. For instance, if 10% of cash bonus is issued, a loss of 10% on the share price is likely to be observed. Remember that the bonus is subject to tax.
A stock bonus is also fairly common. This is a bonus that comes in the form of extra shares for each share that one has. For example, a company may issue three extra shares for every share held. This means that an individual with 300 shares gets an extra one hundred shares to make a total of 400. The term stock bonus is used when the total number of shares issued is less than 25% of those held by a company.
A property bonus is a non-monetary bonus issued by a company to its shareholders. This bonus is captured in the records using the fair market value of assets that have been distributed. The market value may vary from the book value of the same property result into a profit or loss transaction. It is for this reason that some businesses opt for this kind of bonus so as to reduce their taxable income.
Scrip bonuses are issued under special circumstances. They are recommended by the board of directors when the company does not have monetary bonus to issue but is still keen on paying out at some point in the future. They work like promissory notes. The company may be planning to plow back the profits made or may not be making enough profits yet.
Liquidating bonuses are a bit rare. They are usually a one-off payment given to founding members of a company as part of their seed capital. The term is used because this type of dividend becomes necessary when there are plans to wind up a company. The accounting process involved when allocating these pay-outs follow the same principles as cash pay-outs.
Companies can issue one or several of these dividends depending on how well they are performing financially and the kind of resolutions passed by the shareholders. Potential investors use the history of dividend pay-out as one of the determinants of stability of a company. Ensuring a regular dividend pay-out is, therefore, one of the ways of attracting investment. The disadvantage of this is that retained earnings are reduced.
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