What is a Dividend?

Definition and Concept

• Dividends: Payments from a company to its shareholders, derived from the company's profits.
• Expressed in cents per share and paid on a per-share basis.
• More shares owned = more dividends received.

Importance to Investors

• Dividends are a key consideration for investors.
• Dividend Yield: Important metric showing how much a company pays out in dividends relative to its share price.
  • Formula: Annual dividends per share / Price per share.
• Allows comparison of historical income return from different companies.

Considerations

• Dividends are not guaranteed; past performance does not guarantee future payments.
• Companies may not pay dividends every year due to lack of profits or choice to reinvest earnings.
• Regular policy: Companies paying dividends tend to follow consistent policies.

Accessing Dividend Information

• ASX Website: Resource to search for the latest dividends.
• Dividends typically received twice yearly as interim and final dividends.

Shareholder Process

• Post becoming a shareholder, complete forms for account details with company’s share registry.
• Dividends paid into nominated account or via cheque.
• Keep account details updated.

Important Dates

• Record Date: Determines eligibility for receiving dividends.
  • Set by the company; shareholders at 5pm on this date are eligible.
• Ex-Dividend Date: Set four business days before the record date.
  • Shares must be purchased before this date to receive dividends.
  • Buying shares before this date = buying cum dividend (with entitlement).
  • Shares bought on/after this date do not receive current dividend.

Imputation Credits

• Impact on after-tax income.
• Franked Dividends: Received from profits already taxed by the company.
  • Shareholders not taxed on the full amount of franked dividends.
  • Tax credits possible for certain investors (e.g., superannuation funds).

Additional Resources

• More information available on the ASX website and the Australian Taxation Office website.
• Contact: [email protected] for further queries.