Dividends

What are dividends?

Dividends are the profits that are obtained from the profitability of the commercial operations of a company, for a specified period.

In other words, it is the money from the profits that, under the prior approval of the company's board of directors, is paid to the partners..

The amount of the dividends is established according to what is indicated in the company's bylaws and is distributed proportionally among the associates, according to the percentage corresponding to the total number of shares they own.

Dividend classification

The main types of dividends are the following:

• Extraordinary dividends: when the company obtains extra profits, these become extra dividends for shareholders according to the percentage that corresponds to each one.
• Complementary dividends: it is a supplement that is paid to the shareholder and that is added to the initial payment of dividends.
• Dividends on shares: these are those dividends that are paid for equivalent shares of the company in question.
• Fixed dividends: They are determined according to criteria of the company and its partners, and are paid to the shareholders regardless of the profits made by the company.
• Dividends on account: this is the payment as an advance on account of the dividends obtained by the company.

How to calculate dividends?

Dividends result from the product between the net profits of a company and the payout assigned to each partner. These can be paid with company shares.

Formula to calculate dividends.

• The net profit are the earnings of an organization after deducting expenses and taxes.
• The payout is the portion of the total profit of a company, which is paid to shareholders as dividends. If a company has a 25% payout (0.25), it means that it will have a quarter of its profits for the partners.

If a company has a 30% payout, 30% of their profits will be distributed among the partners as dividends. In other words, if said company generates a net profit of $ 100, the account to calculate the dividends would be the following: 100 * 0.30, which would give a total of $ 30 to distribute among the partners.