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Dividends: Interesting Facts to Bear in Mind


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7/18/2014
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When dividends are paid by a corporation, the shareholders are receiving a set percentage of the company’s profits or earnings. In general, dividends are usually paid to shareholders in the form of cash, stock or property. Although a company’s share prices may not rise very much, dividends can help make up for this. However, if a company is going through a period of high-growth, shareholders may see few dividends since the company is often reinvesting as much of its profits as possible into this expansion or growth.                     

Apart from these most basic facts about dividends are others that may or may not be as well-known to some investors. By carefully reviewing the following information, you should be able to more accurately guess in the future when stock dividends are most likely to be paid.

Useful Facts and Perspectives About Receiving Stock Dividends

  • Patience is definitely a virtue. According to the Motley Fool, “Apple . . . [which] holds the record for the highest market valuation in history, only began paying a dividend in August of [2012] after a 17-year dividend hiatus . . . [However, as of August of 2013, it was] expected to pay out $11.08 billion in dividends over the next four quarters . . ;”

  • Dividends can make a person very, very wealthy. They can play a “gigantic role in creating wealth for investors in the United States.” It was stated in one ABC news report that “Of the S&P 500’s nominal total return from 1910 to 2010, dividend yield and dividend growth comprised 90 percent [of] returns for stock holders.”  In other words, Motley Fool states that, “Compounding long-term dividend growth is a key driver of wealth appreciation;”

  • The timely payment of dividends differs all around the world. In America, some of the largest companies like Coca-Cola and Johnson & Johnson pay their dividends on a quarterly basis. However, companies like Novartis and Siemens usually just pay annual dividends. It can be difficult to predict the frequency of dividends, as noted in the reference above to Apple. Oddly enough, there are actually companies that pay dividends on a monthly basis – they are often REITs [Real Estate Investment Trusts] or energy companies;

  • The Dividend Aristocrat as defined by Standard & Poor’s. If you like to see your dividends constantly increase [although this is definitely not the only sign of a strong or healthy company], you might look out for those that Standard & Poor’s labels as “dividend aristocrats” – companies that have “increased [their] dividends for 25 straight years, excluding special dividends;”

  • You can’t always accurately judge a company’s health based upon its recent payment of dividends. “Companies can and have, paid dividends with borrowed money or sources of funds other than operating cash flow;”

  • The types of companies that tend to offer stable dividends. Stated simply, “utilities and telecoms are famous go-to sectors for dividend-paying companies.”

You can located more of these types of facts that can help you better judge specific companies’ dividends payments by visiting each of the links referenced above.

To obtain help with handling all of your Georgia business planning needs, please contact the Law Offices of Shane Smith today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.



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