Types of Dividend

Many investors before investing into a company look at the dividend history of the company. Dividend refers to payment made by the company to the shareholders of the company out of the profits made by the company. Given below are the various types of dividend which company can give to its shareholders –

1. Final or Annual Dividend – It refers to dividend which is paid annually by the company to its shareholders, it is also known as final dividend because it is paid after the finalization of accounts. It is paid in cash as a percentage of paid up capital, say 10 % or 15 % of the capital.

2. Interim Dividend – Interim dividend refers to that dividend which is generally declared and paid when company has earned abnormal profits during the year and directors decide to distribute the profits to its shareholders. Interim dividend is paid between the two Annual General meetings and therefore they are called interim dividend.

3. Stock Dividend – Companies which does not have enough cash with them may go for stock dividend also known as bonus shares which is given by capitalizing the profits of the company. Hence under this shareholders receive stock in place of cash from company.

4. Special Dividend – A special dividend is one which is made by a company to its shareholders apart from annual dividend. This type of dividend is made under special circumstances like on account of huge cash in the balance sheet of the company, or when company achieves a milestone like completing 100 years of existence.

1 comment… add one

  • Good little list there. Importantly if you are looking at investing in a company that pays dividends you’d generally want to see a steady trend of increased dividend amounts.

    Also to remember when a company pays out a dividend you can usually expect to see the stock value to drop by that same amount.

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