How to Disburse Corporate Dividends
Companies can pay investors in two ways, through share price appreciation or dividends. Those investors looking for income tend to prefer dividend-paying stocks. Corporations that pay dividends have a policy and procedure in place for making those payments. Once a policy is in place, the board of directors sets the date for the dividend. The amount of the dividend is generally determined by the current dividend policy and the performance of the company. Companies can have a residual (leftover earnings) or stable (fixed amount) policy. Most companies have a hybrid of the two.
Other People Are Reading
Instructions
-
-
1
Review the dates involved in the process. The declaration date is the date the dividend is declared. The ex-dividend date is the day the stock no longer pays a dividend. Stockholders buying stock after this date do not get to participate in the most recent dividend. The record date is the date the shareholders are determined. Finally, the payable date is the date the dividend is actually paid on.
-
2
Set the dates for the transaction. Start with ratifying the amount with the board of directors. Then determine a date and send to accounting.
-
-
3
Issue a press release on the date of declaration. See Resources for an example of a press release announcing dividends. The press release should specify all steps involved.
-
4
Make accounting and the corporate bank aware of your dates, and disburse funds according to schedule. The funds come out of retained earnings and are disbursed by check to all stockholders of record. The brokerage may also allow investors to reinvest dividends or receive them via wire; however, this is at the discretion of the investor. This is a function of the corporate bank, as it involves tax considerations and disclosure requirements that the bank can handle better than your accounting unit. The only information the corporate bank needs from you are the dates and list of shareholders on the date of record.
-
1
