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Dividends

• Periodic distributions of earnings to the owners of stock in a firm paid only at the discretion of the board of directors.

 
 

Follow this link for all the terms related to dividend.

 
 Embedded terms in definition
 Board of directors
Distributions
Earnings
Firm
Stock
 
 Referenced Terms
 1099 div: Is a form that reports taxable Dividends and capital gains from mutual funds to the Internal Revenue Service (IRS).

 Average percent payout: The average of the percentage of a company's profits paid out in Dividends to shareholders, typically calculated over the last five years. A high percent payout can be a danger sign. Recent payout figures higher than 50%, and higher than the average payout, may forewarn of a dividend cut. A dividend cut would likely cause the stock price to fall. Generally, the higher the payout ratio, the lower the expected growth rate for the company's EPS in the future.
Sometimes, although the dividend payout is more than earnings, the company has strong cash flow and can cover the dividend in the short term. However, a company paying out dividends in excess of earnings on a recurring basis is a risky investment.

 Blue chip stock: Stock in a well-established, financially-sound and stable company that has demonstrated its ability to pay Dividends in both good and bad times, and has as a reputation for quality management, products, and services.

 Board of directors: Individuals elected by stockholders to establish corporate management policies. A board of directors decides, among other issues, if and when Dividends will be paid to stockholders.Group elected by the firm's shareholders and having ultimate authority to guide corporate affairs and make general policy.

 Business model eps projection: Estimates EPS by applying profit and tax margins to the projected sales rate five years into the future. This centers attention on profitability rather than sales expansion. This formula may be used to estimate earnings per share five years ahead. It starts with the sales growth projection. (This is used because sales growth is historically more consistent and stable than earnings growth.) Expenses, taxes, and preferred Dividends are then subtracted from sales. Finally, the result is divided by the shares outstanding to show the 5-year forecast for EPS. It is worthwhile to compare this sales-based EPS projection with other methods. This should help to confirm the reasonableness of your future 5-year EPS projection.

 
 Related Terms
 Common dividends
Date of record dividends
Dividend or dividends
Dividends per share
Extra or special dividends
Intercorporate dividends
Preferred dividends
Residual theory of dividends

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