Definition
Dividend Declared refers to a company’s announcement that it is issuing a payout to its shareholders in the form of dividends. This decision is usually made by the company’s board of directors and represents a portion of its earnings being distributed. The actual payment comes at a later date, but the declaration serves as an official announcement of the upcoming distribution.
Key Takeaways
- Dividend Declared refers to the announcement made by a company’s board of directors about the amount of profits to be distributed to its shareholders. It is a portion of the company’s earnings allotted by the company as a return on the shareholders’ investments.
- This is typically done after careful consideration of the company’s remaining capital, after accounting for reinvestment and business expenses. It showcases the company’s profitability and forms a significant part of the investment return.
- Dividends declared could be a determining factor for potential investors. Regular dividend payments may signify financial health, but lack of dividends does not necessarily indicate poor financial health as many companies choose to reinvest their profits for growth opportunities.
Importance
Dividend Declared is a significant term in finance as it represents the amount of earnings a corporation plans to distribute to its shareholders.
This announcement reflects the company’s profitability and financial health, serving as an indicator for investors interested in the company’s performance and potential for return on investment.
Additionally, decisions on dividends often impact the company’s share price – when a dividend is declared, especially if it’s higher than expected, the company’s stock price may increase.
Conversely, a smaller or skipped dividend might indicate financial trouble, leading to a decrease in share price.
Thus, tracking Dividend Declared is a critical part of investment analysis.
Explanation
Dividend declared serves a crucial role in the finance and investment sector, primarily providing investors with a tangible return on their investments. This term essentially relates to the portion of profits that a corporation decides to distribute to its shareholders.
The purpose of declaring a dividend is to distribute a fraction of the company’s earnings back to its investors, which can serve as an incentive for investors to maintain or increase their stock holding in the company. Dividends work as a signal to the investors about the company’s current financial health and future prospects.
The declaration of dividends also plays a significant role in attracting potential investors and maintaining the company’s reputation in the market. If a company regularly declares dividends, it is generally perceived as financially stable, attracting more investors and creating a positive image in the stock market.
Notably, the decision to declare a dividend is discretionary and depends on factors such as current earnings, projected future earnings, and the company’s reinvestment plans. Overall, the declaration and distribution of dividends are a crucial aspect of a company’s financial management strategy.
Examples of Dividend Declared
Coca-Cola Company: This global beverage giant has a long history of issuing dividends to its shareholders. In February 2021, Coca-Cola declared a quarterly dividend of $42 per common share, which represents a steady return for the shareholders. The trend of regular dividends has helped Coca-Cola attract and retain long-term investors, demonstrating the practical implications of the finance term ‘Dividend Declared.’
Microsoft Corporation: Another famous example of a company that regularly declares dividends is Microsoft. Microsoft declared a dividend of $62 per share in December 2021, continuing a long-held practice of returning capital to shareholders through dividends. When the company announces such dividends, this event is a clear representation of ‘Dividend Declared’.
Johnson & Johnson: Operating in the pharmaceutical sector, Johnson & Johnson is another company with a strong track record of consistent dividend declarations. In April 2021, the company declared a 5% increase in the dividend rate to $06 per share, marking 59 years of consecutive dividend increases. Such actions generate strong loyalty among investors, highlighting the value and implications of ‘Dividend Declared’.
FAQ: Dividend Declared
What is a Dividend Declared?
A declared dividend is a dividend that has been announced by a company but has not yet been paid to shareholders. It is the amount of earnings a company informs its shareholders it will distribute.
How is the Dividend Declared calculated?
The dividend declared is typically calculated as a percentage of a company’s net earnings. The Board of Directors makes this decision based on the company’s profitability and future investment requirements.
When is a Dividend Declared?
A dividend is usually declared on the date of the company’s annual general meeting or at an extraordinary general meeting.
What is the impact of a Dividend Declared on shareholders?
When a dividend is declared, it becomes a liability for the company as it is an amount due to shareholders. For shareholders, dividends constitute a return on their investment in the company.
Can a company declare dividends if it is not making a profit?
Generally, companies declare dividends from profits. However, it is possible for a company to declare dividends from reserves if it is not generating a profit, given that the company’s by-laws allow it.
Related Entrepreneurship Terms
- Dividend Payable Date
- Dividend Yield
- Retained Earnings
- Stock Dividends
- Payout Ratio
