1.When you buy a share in a company, you are effectively becoming a part owner of the company. As a shareholder and owner of the business, you would expect to receive some returns periodically, usually on an annual basis when the company performs well and making profits. This return on investment can be in the form of capital appreciation (the shares that you own is worth more than when you initially purchased it) or dividends (a payout to shareholders from the profits of a company).
2. Dividends may be paid to you in cash or in kind. A cash dividend is a payment made by a company to its shareholders in the form of cash. When the company decides to pay the dividends in kind, you will receive dividends in the form of the company’s shares. Dividends in the form of shares will cause an increase in the number of your shares that you own in the company. So instead of owning 1,000 shares, you will own 1,100 shares if the company pay dividend in kind of 100 shares for every 1,000 shares that you currently owns.
3. According to Singapore Companies Act, a company must first have available profits before they can pay dividends to its shareholders. If the company has retained loss on its balance sheet, they are not in a position to declare any dividends. Thus, shareholders should only expect companies that are profitable, have strong cash flows, good management and have available profits to pay dividends to them.
4. The board of directors of the company decides whether to pay dividends to shareholders, the amount of dividends to be paid and when to pay dividends. However, this decisions must be approved by the shareholders. If shareholders disagree with the company’s dividend policy, they can vote to approve or reject the dividend proposed by the directors at a company meeting. A majority of shareholders must vote in favor of the dividend to pass the resolution.
5. Dividends are often paid quarterly, half-yearly or annually and is paid based on the number of shares that you owned. For example, if a company’s board of directors decides to pay a yearly $0.10 dividend per share and you owns 1,000 shares, the annual dividend amount is $100. If the dividends are issued every quarter, each distribution to you is $25.
6. You may ask is dividends important ? Here is some of the reasons why dividends is important to investors. It is a sign that the company is earning a healthy profit and is willing to share it with its investors. It helps to provide insight into a company’s intrinsic value. Dividends also a sign that the company has strong management, stable revenue, strong cash flow and is generating profits.
9. If you need help to know whether and how much dividends your company can pay, please come and talk to us. We at PL Biz Consulting Pte Ltd have the expertise and dedicated experts to guide and assist you.
