Computation of Dividends

1. Someone buys shares in the hope of receiving a dividend. Dividends will be paid to shareholders if the company earns profits.

2. Not all company profits are distributed to shareholders as dividends. Some of the company’s profits will be set aside for proposals or reserves. Others are brought to the next accounting year.

3. Dividend rates paid to certain shareholders by the board of directors and agreed upon by the shareholders.

4. Dividends paid on paid-up capital only and not authorized capital.

5. Dividends can be paid to shareholders in two forms, namely:
(a) Dividends paid in cash
(b) The grant of a company’s shares

6. Dividends are declared in the percentage of the par value of the shares and not the percentage of the current market value. Occasionally, dividends are declared in the form of cents per share unit, for example, five cents per share unit.