Part of the company's profit, which is distributed among its shareholders, is called dividends. By purchasing shares on the stock exchange, the investor receives the right to receive income while owning the shares of the company.
Having bought dividend shares from top and reliable enterprises, an investor can make a good fortune from their share of profit. Share income may be paid once every six months, quarterly or annually, depending on the decision of the shareholders.
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As a rule, fast-growing, newly formed companies leave most of the funds for development. Those companies where a sustainable business, pay dividends.
Thus, dividends, being part of the company's profits, depend on the success and financial performance of the organization.
The dividend yield of shares depends on the volume of issued securities. Total income is divided by their number in order to determine dividends per share. Typically, the company's charter spells out dividend shares and the amount of payments accepted by the meeting of shareholders.
The following can be said about the size of payments in accordance with the charter:
- Gazprom is obliged to pay shareholders 10 percent of the profit; upon payment, they reach 45 percent (in 2017).
- Sberbank makes dividend payments on shares from 20 to 25 percent.
- The Moscow Exchange (MICEX) deducts up to 70% to shareholders.
A professional broker can help you deal with complex cases of a company's dividend policy.
How to receive dividends
To buy dividends, you need to know the date of the registry. The register contains information on the shareholders of the company and the number of shares held. The registry fix date is usually published in the public information section of the company.
Fixing the register is necessary due to the fact that a large number of shares are usually traded on the stock exchange and not all investors can get into the register fixed on a certain date, or you can be late with the purchase.
What you need to do in order not to be late:
- Find out the registry fix date in advance and buy stocks.
- Get dividends.
- Try to make the purchase in advance, because after the dividend yield of the shares is announced, they are getting more expensive.
- Take into account that for shares, the term for the execution of the transaction and the onset of law is usually three days, if the transaction does not pass before the cut-off date, stock profits should be received only in the next dividend cycle.
- Find out the registry closing date (cut-off date) and payment date. For example, if a company announced the payment of dividends in the amount of $ 0.15 per share with a cut-off date of July 18 and payment of shares on September 20, then the investor must buy the shares no later than July 17.
- All investors who bought shares before the cut-off date will be entered into the register of shareholders and receive payments.
How and where to purchase shares
It is impossible to make a purchase on your own. You can purchase Russian dividend shares on the Moscow Exchange. To do this, you must conclude an agreement with a broker and gain access to the stock market for transactions on the sale of shares.
Schematically, the process of investing in stocks is as follows:
- Brokerage Service Agreement.
- Replenishment of IIA - individual investment account.
- Gaining access to the stock market.
- Buying or selling, as well as the ability to perform other operations under dividend shares.
What affects the increase and decrease in stock returns
The decision to invest in certain stocks is influenced by various factors, not only profitability. No less important indicators are:
- Payout ratio - defined as a percentage of earnings per share. The ability of a company to pay dividends depends on this ratio.
- Total return - the indicator (or metric) depends on the ratio of the dividend to the value of the security, gives an idea of the overall profitability. For example, if in the current year the stock rises in price by 3 percent, and the dividend income is 2%, then the total yield of the stock will be five percent.
- Earnings growth per share - This indicator indicates growing profits and the possibility of increasing the size of dividends, respectively, is used to determine the dividend yield of the stock.
- Profit to price ratio - this indicator is used when evaluating the company and for comparing shares of various issuers.
- Reinvestment as a way to influence the dividend income of shares is used to maximize the benefits of investing. With the help of a broker, you can join the reinvestment plan in order to purchase shares additionally. This type of transaction is not subject to additional commission.
Catch the bird of luck
Each investor wants to have complete information about stock returns and the size of payments. To do this, carefully monitor the meetings of shareholders. Indeed, the size of dividends and the decision on how to make payments depend on the decision of the general meeting, which is usually convened once a year. There are extraordinary meetings of shareholders, including decisions on various issues of the life of the company.
On the eve of the general meeting, the joint-stock company carries out the following actions:
- The board of directors of the company approves recommendations on the amount of dividends.
- The meeting of shareholders approves the recommendations.
- Information is published on the date of the meeting on the site for investors of the company.
- In a Russian company, there is control of the majority shareholders, that is, the owners of the main share of the shares. They have the right to make decisions for the general meeting.
Key questions investor in stocks
An investor needs to know that the issue of register formation depends on a special registrar (registrar). In this regard, the company sends the registrar an order on the formation of a register of shareholders with identification of dividend recipients - shareholders.
In addition to this information, the order contains information on the amount of payments for each shareholder, and the calculation of taxes. If there is no necessary information at the disposal, this does not exempt the joint-stock company from the obligations of settlement with shareholders.
The general meeting of shareholders determines the date of payment of dividends. Funds must be transferred within 25 business days after the registry is closed in accordance with Federal Law No. 208, Art. 42.