how does dividend work? dividend, does, work

wongcasey

time to ask the LYK finance experts:

when i buy a stock that has dividends, when does the company pay the dividend?
and how does the investor get paid? i'm assuming the company doesn't just send a cheque to the investor
and if it's a 1% dividend rate, it's 1% of what? revenue, earnings, or what?

ravemother

I will try to answer your question. Other lyk can correct me or add more details.

A company has no obligation to pay dividend to its shareholders. Debtors have the priority over the company’s earnings and assets. After paying the debtors, the company can either keep the leftover earnings for next year’s operations. (Eg, expand capacity, etc) OR it can pay its shareholders in the form of dividend.

Frequency of paying the dividend (派息比率%) really depends on the company’s management (board of directors). Usually at the end of its fiscal year or after it publish its 業績. The companies I invested in always pay my dividend through direct transfer to my back accounts, but you can request other ways of payment.

hope I have answered most of the questions.

I will leave your last question to the other lyk.

[ 本帖最後由 ravemother 於 2007-12-11 16:05 編輯 ]

cyberstudio

My dividends all get deposited as cash into my stock trading account.

Like ravemother said there is no fixed dividend rate. In fact if the company's results are poor, the board may decide to not pay any dividends.

Some companies never pay any dividends no matter how much they make. They would use the profits they make to reinvest or buy back their own stock. Generally speaking, you pay less tax on capital gain than on dividends, so some people prefer stocks which grow fast even though they never pay any dividends.

excel

原帖由 cyberstudio 於 2007-12-18 22:08 發表
My dividends all get deposited as cash into my stock trading account.

Like ravemother said there is no fixed dividend rate. In fact if the company's results are poor, the board may decide to not pay  ...

Let me clarify further, dividend not only depends on company profit and also the corporate policy, some company try to leveling the dividend payout no matter certain year's result, so sometime you can see company paying dividend even low profit. Basically, if you prefer dividend (it may benefit somebody with low earned income) you can buy value stock, if you prefer capital gain only, you can buy growth stock.