What is a dividend?

The dividend is the part of the profit of a company that is distributed among the partners or shareholders of a company. Its amount must be approved by the General Meeting of Shareholders at the proposal of the board of directors. Before entering the matter, we will have to establish what is an active and passive dividend.

On the one hand, the active dividend is the part of the profit obtained by the mercantile companies whose corporate bodies agree that it be distributed among their partners. In other words, once its distribution has been agreed, the active dividend is a credit of the partner against the company. On the other hand, the passive dividend is the credit that the mercantile company has against the partner, for the part of the capital stock that it subscribed and that it agreed to disburse.

Dividend types

Dividends are the economic right par excellence granted to partners or shareholders of a society. They represent the part of the profits obtained by a company that are used to remunerate shareholders for their contributions to the company's capital stock. Undistributed profits in the form of dividends are used to build reserves in order to promote the growth of the company. There are different types of dividends that you can see below:

  • Interim dividend: It is the dividend distributed to shareholders prior to the approval of the annual accounts, on account of the estimated profits for the year.
  • Complementary dividend: It is the dividend that is paid when dividends on account have already been paid and once the amount to be distributed among the shareholders has been specified according to the result of the year.
  • Extraordinary dividend: It is the dividend from the generation of extraordinary benefits.
  • Fixed dividend: It is the dividend fixed by the company, regardless of the result obtained by it.
  • Gross dividend: It is the dividend distributed before deducting the tax effect.
  • Net dividend: It is the resulting dividend after taxes.
  • Scrip dividend: It consists of paying the dividend in the form of company titles, instead of money.

You should know that not all companies periodically distribute dividends in accounting, since this type of remuneration for the shareholder depends, fundamentally, on the capacity and financial solvency of the company, its profits, growth strategies and the moment of the cycle economic that they go through.

In the case of companies listed on financial markets, those that distribute dividends in a sufficiently regular and stable manner are a reference for investors when comparing the dividend yield of the shares of these companies, with the return on assets. fixed income. The dividend is received by all shareholders, including those who have acquired the shares one day before the date set and, therefore, would not have had, during the time the dividend was generated, the status of shareholder. In any case, the distribution of dividends requires compliance with certain legal requirements.

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