Inhaltsverzeichnis
What is a dividend?
The dividend is briefly explained as the profit share that a stock corporation distributes to its shareholders. In the Stock Corporation Act, the legislator does not use the term dividend, but in the Stock Corporation Act, Art. 174, para. 2, no. 2, it refers to the “amount to be distributed”. In the case of other types of company such as KG, GmbH or Genossenschaft, there are also profit distributions. The Income Tax Act, on the other hand, unambiguously names all profit distributions from the shares of corporations in Art. 20 para. 1 sentence 1 no. 1 EstG with the term dividend. Distributions from investment funds are also mistakenly referred to as “dividends”. However, these distributions include interest-bearing income and are therefore not dividends in the proper sense. The distributions of a company’s profit participation certificates are in fact not dividends either, but they are occasionally based on the size of the company.
The dividend amount
The amount of the dividend, i.e. the profit share from shares, is determined at the Annual General Meeting. This generally depends on the profitability, the economic situation and the dividend policy of the company concerned. Some companies, in particular those in the technology sector, do not generally pay dividends, but instead set the profit generated in the fiscal year in its entirety, for example in order to advance the company with new investments. The owners themselves determine the amount of the profit at an annual general meeting of the stock corporation. Before this, however, the Executive Board makes a so-called dividend proposal. As a rule, the shareholders approve the proposal. Usually the profit is distributed directly on the day on which the Annual General Meeting takes place.
How often does a company pay a dividend?
The majority of companies pay once 1 per year per dividend. Others, however, distribute a portion of their profits several times over the year. In this case, for example, they pay a dividend to shareholders every quarter. Finally, there are companies which do not pay dividends. That’s because they actually didn’t make a profit. However, it can also be a corporate strategy. There are several reasons for such a strategy. One reason is the assumption that the money could achieve a better return if it stays in the company and is used for new investments. A further reason is possible tax advantages for shareholders.
Types of dividends
The distribution of the profit in cash as a cash dividend is best known: for each share, a fixed amount in cash is credited to the account of the shareholder of the company.
Then there’s the stock dividend. “Stock is the English term for stock. Accordingly, a stock dividend refers to the distribution of the dividend in additional shares. Instead of cash, further shares are credited to a shareholder’s securities account after the distribution.
Distribution in kind is also possible. These could be, for example, shares in a subsidiary that wants to spin off the main company. As a result, these shareholders are the owners of two separate companies. This dividend is also known as a dividend in kind.
The shareholder does not have to do anything about it. The profit share of the shares he holds is automatically credited to his account. However, it is possible to request the conversion of a cash dividend into a stock dividend if the company offers the option and prefers the stock dividend.
Various financial portals on the Internet show lists of the financial dividends paid out in the last few years. Here you will also often find estimates of the amount of future dividends. These estimates are based on forecasts by equity analysts. You should enjoy these with caution, after all, nobody knows the future. It all looks like a coffee grounds reader.