All you want to know but never asked about the stocks and options markets.

lunes, 16 de diciembre de 2013

The Dividends

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What are dividends?

 When traders and investors begin to invest in the stock market and begin to acquire shares, they start to be benefited according to the number and value of shares they have purchased. One of these benefits is the dividends that are part of the profits distributed by a company to its shareholders.

However, the value of dividends is not fixed and depends on the profit of the company, which has to maintain a high percentage of earnings to provide high returns to its shareholders. Dividends, therefore, offer investment income while our stocks are maintained. As discussed above dividend payments are paid from the profits of the corporation regularly every quarter.

For a shareholder gets remuneration by taking advantage of these gains it is necessary to hold those shares until the payment date to generate the greatest possible benefits. Each company has different schedules so we contact the publici relations department of the company for information on the timing of dividend payments.

The dividends can be distributed to shareholders in the form of cash or shares. If the distribution is made via cash, then the net value is determined by taking into account the growth or profits of the company by the General Assembly of Shareholders. If the distribution of this benefit is made in shares: a share is granted for each X shares the investor has, for example if it is determined that a share will be received for every 50 purchased shares, then a shareholder holding 500 shares will receive the total of 10 shares as dividend.

The calculation of dividend

For the calculation of the dividend that we are entitled to receive as beneficiaries we can make the following calculations depending on the dividends provided by different companies:

Calculating the price with constant dividends:
Book value per share = Dividend per share / Required return
Calculating the price with increasing dividends:
Book value per share = Dividend per share / Required return - (g)
Dividend yield calculation:
Dividend yield = Dividend per share expected / current stock price

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