Dividend: Definition, Types, Purpose, and Procedure

Dividend is a familiar term, especially for those who invest in stocks. Dividend is one of the things that capital market investors have been waiting for. So what are dividends?

What Is a Dividend?

In general, dividends are distribution of profits or profits to shareholders based on the number of shares owned. In principle, dividends can be distributed in cash or shares.

According to the Big Indonesian Dictionary (KBBI), dividend means part of a company's profit or income, the amount of which is decided by the directors and approved by the general meeting to be distributed to shareholders.

Simply put, dividends are rights or divisions within a company that benefit those who become investors or shareholders.

Companies usually pay dividends once or twice a year. But there are also companies that do not pay dividends because the funds generated from the company's income are invested in the company's capital.

This condition is called retained earnings. On the other hand, unprofitable companies usually don't pay dividends either.

Types of Dividends

1. Stock Dividends

If the number of shares owned by shareholders increases or increases, then the company will pay stock dividends. However, this does not change the capitalization in the market because the division is similar to a stock split. The method of payment is to increase the number of shares while decreasing the value of each share.

The distribution is a return on the company's investment. As a result, the share assets owned by the Company will increase due to the stock dividends paid.

2. Liquidation Dividend

Liquidation dividend means the return of capital from the company to the shareholders. If the company goes bankrupt, the company has the right to return shares to shareholders. The goal is that the company does not have debt or problems in the future.

3. Cash Dividend

Distribution of cash dividends refers to the distribution of profits from investment capital received in cash. Companies can pay cash dividends 2-4 times a year. Funds for paying cash dividends will be taken from the company's retained earnings, so that profits will automatically remain and the company's cash reserves will decrease.

4. Property Dividends

As the name suggests, this property dividend is paid with assets or assets other than company cash. It can be in the form of a house whose value is in accordance with the dividend approved by the general meeting. This dividend was paid because the Company's ability to pay cash dividends has decreased. This dividend is also rarely done because it is quite complicated and is not liked by shareholders.

5. Dividend Pledge of Debt

This method of paying dividends or promissory notes is to make shareholders become promissory notes of a company. A statement of promised performance or payment of debt within a certain period of time. This dividend represents the arrival of new debt and must be recorded on the balance sheet. There is also interest, so the company is obliged to pay interest and debt to shareholders.

Purpose of Paying Dividends

Dividend payments are intended to reward shareholders for their trust in the company. Companies that pay dividends are viewed positively and help protect investor confidence.

Dividend Payment Procedure

The dividend payment procedure is also known as the dividend notification date. Here are 5 dividend payment methods that you should know:

1. Date of Recording

The date of record includes the name of the investor and shareholder information in the company authorized to pay dividends.

2. Cum Dividend Date

Last stock trading date for investors who wish to receive dividends in the form of cash dividends or stock dividends.

3. Notice Date

The date on which the issuer or public company officially announces the form, amount and time of dividend payment.

4. Payment Date

The date on which the company pays dividends to shareholders who are entitled to dividends.

5. Ex-dividend date

Release date of stock trading based on company receiving dividend right.

Thus was the discussion about dividends that you should know. I hope this helps.