Four types of dividends: Four ways they are being paid out
Dividends are one of the payout when it comes to investment. However, many do not understand what a dividend is. When you buy a company's stocks, you may expect the share price to rise and dividend as a form of return. One of your rights as a shareholder is to receive a portion of the company's profit.
A corporation can use four different types of dividends to distribute a portion of its profits: cash dividend, stock dividend, hybrid dividend, or property dividend. Let's check out the differences among them!
Cash Dividend
A cash dividend is a payment to stockholders generally from the corporation's current earnings or accumulated profits. Cash dividends is a common way for a company to payout to their shareholder.
A cash dividend is a payment to stockholders generally from the corporation's current earnings or accumulated profits. Cash dividends is a common way for a company to payout to their shareholder.
For instance, here are the three Singapore stocks that distribute cash dividends.
1. Keppel Corp
1. Keppel Corp
Keppel Corporation is one of the world's largest oil rig builder, with a 4.95% cash dividend yield (as of Apr 28, 2022, Morningstar).
2.Hong Kong Land
Hong Kong Land is one of the biggest real estate companies in the world, with a 4.54% cash dividend yield (as of May 17, 2022, Morningstar).
3.OCBC Bank
OCBC is the second-largest financial institution in Singapore, with a cash dividend yield of 4.29% (as of May 06, 2022, Morningstar).
Stock Dividend
In contrast to cash dividends, stock dividends are distributed to shareholders in the form of shares. Company will issue stock dividend when they want to reward their shareholders without reducing the company's cash balance.
In contrast to cash dividends, stock dividends are distributed to shareholders in the form of shares. Company will issue stock dividend when they want to reward their shareholders without reducing the company's cash balance.
For example, the board of a publicly-traded company could approve a 5% stock dividend. As a result, shareholders who already own 20 shares of the corporation receive one additional share. However, this results in a 5% increase in the company's stock share pool, which lowers the value of current shares. Hence, the total market value of the company doesn't change. The only change is the price of each share.
Hybrid Dividend
A hybrid dividend is a combination of stock and cash payout.
A hybrid dividend is a combination of stock and cash payout.
Here is one example:
An investor owns 100 shares of ABC Corporation. The firm declares a stock-and-cash dividend of 10% of the shares owned plus 30 cents per share. The shareholder would get 10 more shares of ABC's stock and an additional $30 cash dividend.
An investor owns 100 shares of ABC Corporation. The firm declares a stock-and-cash dividend of 10% of the shares owned plus 30 cents per share. The shareholder would get 10 more shares of ABC's stock and an additional $30 cash dividend.
Property Dividend
Property dividends have a monetary value despite being considered non-monetary dividends.
Property dividends have a monetary value despite being considered non-monetary dividends.
Let's see the example below:
There are 1,000 stockholders in XYZ Corporation. It owns 1,000 paintings and has kept them in the vault for many years. These paintings have a fair market value of $1,000,000. And the company decides to give each shareholder one painting worth $1,000. Then, a shareholder can sell the print or keep it for long-term capital gains.
There are 1,000 stockholders in XYZ Corporation. It owns 1,000 paintings and has kept them in the vault for many years. These paintings have a fair market value of $1,000,000. And the company decides to give each shareholder one painting worth $1,000. Then, a shareholder can sell the print or keep it for long-term capital gains.
Which type of dividend is better?
That depends on the perspective of each investor.
If you are interested in capital gains, you might choose to receive stock dividends, which are tax-free until you sell the shares.
If you are looking for a monthly source of income, you might prefer cash dividends, which give you more options.
That depends on the perspective of each investor.
If you are interested in capital gains, you might choose to receive stock dividends, which are tax-free until you sell the shares.
If you are looking for a monthly source of income, you might prefer cash dividends, which give you more options.
This brief article only skims the surface. If you want to learn more or have questions about dividend stocks, please let us know in the comments.![]()
Disclaimer:
Moomoo app is a trading platform offered by Moomoo Inc. In Singapore, capital markets products and services on moomoo are offered by Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS).
Moomoo app is a trading platform offered by Moomoo Inc. In Singapore, capital markets products and services on moomoo are offered by Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS).
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USleepUDie : I don't even know there are so many types of dividend, good to know!
Adijamaludin : Wow!! This is informative
xuan2016 :
甜心0121 : Nice, this article theme elaborates on the mode of dividend distribution/ paid-out ie. cash, shares or physical assets. Looking forward to more dividend articles' themes that can be delved into such as timing, classification, etc.
FattAgain69 : So, a stock dividend is like a stock split where you think you are getting something but gain nothing substantially? Gain extra shares but overall value reduced (at least you get paid with cash dividend for holding it).