What Is A Dividend?

A dividend is the stockholders' share of the divisible profits of a corporation, usually paid to him in cash at certain stated periods. Various conditions exist under which dividends are paid; in many cases they are not paid in cash. A "scrip" dividend is one payable in scrip, which is a small certificate bearing interest at the legal rate, usually convertible into stock, but carries no voting power or dividend until converted into stock. A stock dividend is one payable in the stock of the company, being large enough to enable the holder to receive a full certificate and not fractions or scrip. Cash dividends are usually paid by check to the owner of the stock, in whose name the certificate stands. If the owner of the stock has failed to have his certificate transferred to his name on the books before foreclosing, the dividend is paid to the former owner, who must in time pay it to the new owner. A speculator who is short of a stock when a dividend becomes due is obliged to pay the amount of the dividend to the real owner.

What Are Accrued Dividends?

If a 6% dividend on a stock is payable semiannually January and July 1st, the amount of accrued dividend on a given date, such as April 1st, will be 1½%, the proportion of the regular dividend which is not yet due. Cumulative dividends which have not been paid when due, but have accumulated, are sometimes called accrued dividends, but the correct term is "accumulated dividends." A cumulative dividend is not an accrued dividend.

What Are Accumulated Dividends?

They are cumulative dividends which have not been paid as they fell due. In many corporations, particularly industrials, there are issues of preferred stocks on which the dividend charge is so heavy that the corporation is not able to earn and meet the payments. The amounts of dividends, therefore, have accumulated and ostensibly should be paid some day. Usually when dividends of this kind, or portions of dividends, have accumulated over a series of years and there is little prospect of the corporation being able to liquidate the back payments, some plan is submitted to the stockholders by which the accumulations are paid, frequently in securities of some sort, then the dividend rate is reduced for the future. The cumulative clause in a stock is really not of a great deal of value if the corporation cannot in some way earn sufficient money to pay the full dividend.

What Are Cumulative Dividends?

This term carries the same meaning as accumulative dividends.

What Is An Ex-Dividend?

A term signifying without or not including a dividend. Dividends on stocks are generally declared payable on a certain day after the closing of transfer books. It may be five days or any other number. During this period the stock cannot be transferred from one name to another. Therefore, it sells at a new price, usually measured by the amount of the dividend declared, on which the books have closed. Unless otherwise arranged, no stock transferred while books are closed will carry the dividend, as it goes to the owners of stock of record prior to the closing of the books.