The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: cash and stock.
A cash dividend is a payment made by a company out of its earnings to investors in the form of cash (check or electronic transfer). This transfers economic value from the company to the shareholders instead of the company using the money for operations. However, this does cause the company's share price to drop my roughly the same amount as the dividend. For example, if a company issues a cash dividend equal to 5% of the stock price, shareholders will see a resulting loss of 5% in the price of their shares. This is a result of the economic value transfer. Another consequence of cash dividends is that receivers of cash dividends must pay tax on the value of the distribution, lowering its final value. Cash dividends are beneficial, however, in that they provide shareholders with regular income on their investment along with exposure to capital appreciation.
A stock dividend, on the other hand, is an increase in the amount of shares of a company with the new shares being given to shareholders. For example, if a company were to issue a 5% stock dividend, it would increase the amount of shares by 5% (1 share for every 20 owned). If there are 1 million shares in a company, this would translate into an additional 50,000 shares. If you owned 100 shares in the company, you'd receive five additional shares.
This, however, like the cash dividend, does not increase the value of the company. If the company was priced at $10 per share, the value of the company would be $10 million. After the stock dividend, the value will remain the same, but the share price will decrease to $9.52 to adjust for the dividend payout. The benefit of a stock dividend is choice. The shareholder can either keep the shares and hope that the company will be able to use the money not paid out in a cash dividend to earn a better rate of return, or the shareholder could also sell some of the new shares to create his or her own cash dividend. The biggest benefit of a stock dividend is that shareholders do not generally have to pay taxes on the value. Taxes do need to be paid, however, if a stock dividend has an cash-dividend option, even if the shares are kept instead of the cash.
Stock dividends are thought to be superior to cash dividends as long as they are not accompanied with a cash option. This is due to the choice that stock dividends offer compared to cash dividends. But this does not mean that cash dividends are bad, they just lack choice; a shareholder could still reinvest the proceeds from the cash dividend back into the company through a dividend reinvestment plan.
>For example, if a company issues a cash dividend equal to 5% of the stock price, shareholders >will see a resulting loss of 5% in the price of their shares.
Assuming that the company is initiating that 5% cash dividend (& previously had none), wouldn't this in practice be offset by increased investment in the stock from income investors?
dividend are usually paid when they are due to be paid and in this case I think it will be paid when it is due. The rec-dividend is actally recorded but not paid until it is executed. The ex-dividend is only paid from the dividends that it belongs. In this case I think it will be paid as soon as possible. Let's keep fingures crossed.
BP was Ex-Div on 8/3. Dividend Date is 9/20. That's the pay date. Everyone got a letter, as they do every quarter, with the option to take the cash or reinvest. If you reinvest you will also pay a 1/5% Stamp Duty and a 5 cent per ADR fee.
Your broker should know all this. IF he doesn't, get a new broker.
actually dividend is rec-dividend and when it is executed it becomes ex-dividened. My unerstanding is the dividend is rec-dividend when it is recorded and it becomes ex-dividend when it is executed. Now the dividends are not executed until they are recorded and vice-virsa. So the conclusion is the dividend is not executed until it is recorded and it usually gets recorded on regular basis.
There is no $20 Billion Fund. It is just a promise to provide $ 1.25 Billion per quarter until the third quarter of 2013 at which time $ 20. Billion would have been provided to pay legimate claims.