The dividend, in the stock market, is the portion of profit that a corporation distributes to its shareholders. The dividend is one of the variables most considered by an investor in choosing which stocks to buy, along with the profit opportunity of reselling the company’s share of the market.
The delivery of the dividend is subject to the choice of the directors, who evaluate the corporate conditions together with the financial statements and the investment needs of the company itself, and subsequently the choice is ratified at the extraordinary meeting of the listed company.
The dividend does not provide for the distribution to shareholders of all the profits, but a part previously established. A part of the company’s earnings, as established by law, must necessarily be set aside as a "legal reserve", and another must be held as an extraordinary reserve.
The company may decide to deliver the dividend to shareholders only once a year as a lump sum or in 2 half-yearly payments.
The most widespread choice among listed companies is the distribution of the dividend in the annual solution.
Dividend: types
There are two types of dividends:
- * normal dividend. In the case of a normal dividend, the shareholder of the company can expect regular delivery of the dividend over the years.
- * extraordinary dividend. It is a dividend that does not carry with it a character of regularity.
Dividend: forms
The listed company can decide in what form to deliver the dividend to its shareholders.
Although the most common method is the delivery of the dividend in cash, the formula "free capital increase" is also often used, which for example may consist of an increase in the shares held by the company’s shareholders by a certain percentage.
