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Discussion in 'Investing Glossary' started by Nigel Ward, 7th Feb, 2007.

  1. Nigel Ward

    Nigel Ward Guest

    The name given to the distribution of profits by a company to its shareholders. About one-third of companies listed on the ASX pay regular dividends.

    Typically dividends are paid semi-annually by listed companies. Occasionally an additional unscheduled dividend called a "special dividend" is declared by a company to distribute extra profits to shareholders.

    Dividends can only be paid out of the net profit of a company. The proportion of net profit which is not paid out to shareholders as a dividend is referred to as "retained earnings".

    Most listed companies will have a "dividend policy" which states the intention of the directors as to what proportion of earnings will be paid out as a dividend e.g. 65%.

    Dividends are declared by the directors of a company and are discretionary payments. A company need not pay dividends, in which case the shareholder can only make money if the share price rises.

    Dividends can be tax advantaged receipts in the hands of shareholders because the shareholders may receive the benefit of the tax which the company has paid in the form of franking credits.
    Last edited by a moderator: 8th Feb, 2007