Method of calculating the distribution of dividends – platform
method of calculating the distribution of dividends, Investing through stock trading has recently acquired the acquisition of many, and the matter has expanded with the possibility of trading via the Internet. There is no doubt that this path carries many advantages and disadvantages, as it is a great way to save and a distinctive way to earn more money in the long run, it takes Determining an investment approach and the amount to be invested in the stock trading process with opening a trading account. In this article, we learn about the method of calculating the distribution of stock dividends.
What is the process of distributing stock dividends?
The best way to achieve profits from stock trading is continuity, but in smart ways. At that time, it requires buying shares of shares in large businesses, which must be guaranteed profit through them. In the event of the success of these businesses, these shares must be adhered to or withdrawn, and what is meant by the process of distributing profits Shares, that is, the financial amounts that the company pays on a regular basis to its shareholders, and these amounts are included in its profits or reserves, so that each shareholder takes his share in the company, i.e. a specific amount of money, for each share he owns.
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Method of calculating the distribution of dividends
It can be said that the company’s ability to pay dividends or cash amounts reflects the importance of its commitment to the shareholders of the company’s shares, as well as its basic strength and sustainability for the shareholders. Large companies that are characterized by sustainable growth often tend to pay the percentage of profits to shareholders on a regular basis, while small companies remain conservative. on its profits and then reinvest the profits in the growth process again, the following is an explanation of the method for calculating the distribution of dividends:
The method of calculating the distribution of dividends through net profit and retained earnings
- It is through the balance sheet that the amount of retained earnings the company keeps on its books is revealed.
- It is worth mentioning, however, that the retained earnings mean the total value of the profits that the company has achieved and has not fulfilled its commitment to the shareholders through the distribution of the percentage of profits to them.
Method for calculating dividends from the balance sheet and income statement
- The retained earnings are taken at the beginning of the year and then subtracted from the earnings at the end of the year. The shareholder gets from that equation the net change in the retained earnings throughout the year.
- Then the net change in retained earnings is subtracted from the net profit for the year. In the event of a decrease in retained earnings, it can be said that the result is greater than the net profit for the year.
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When are dividends distributed?
Before buying shares and entering into this trading, the shareholder must have a clear vision about this field, especially with market fluctuations. In the beginning, the goal must be defined before starting the trading process. It may be a specific return or a sum of money. It is preferable to consult a tax specialist. Short-term capital gains are subject to taxes, and this affects net returns, so knowing the tax value contributes to avoiding costly trading errors. The following is an explanation of when dividends are distributed:
- This is on the date of the announcement, where the dividends are announced, with details of their size, date of record and date of payment.
- The record date means the date on which the shareholder must be registered in the company’s books in order to receive the declared profits.
- Knowing that the investor wishing to receive the dividends must purchase the shares before the distribution date.
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Buy stocks before dividends
Sometimes investors tend to take advantage of opportunities by buying shares before distributing profits, and this means speculation on share prices in the short term, and it is one of the daily trading strategies that aims to buy and sell shares in a short period in order to seize profits, and profits are usually distributed annually or quarterly Annually, and during that period, reports issued by large companies are monitored, then stocks are bought and sold to take advantage of the profits.
- Note that the companies that are based on the strategy of seizing profits are limited in the Arab world, the most famous of which is the eToro company in the United Arab Emirates.
- It is preferable to avoid dealing with fictitious companies, especially since this strategy is limited.
- It is possible to resort to trading contracts for differences and speculation on company shares on a daily basis, through brokerage companies and CFD contracts that are licensed and reliable.
Best dividend stocks
It is better to follow the long-term buying strategy instead of the market schedule strategy, and it is better to leave it and move away from it, as you need professional traders, and knowledge of the rules for dealing in the event of losses so that this does not lead to more financial risks. Below we explain the best dividend stocks:
- Services sector: especially electricity and water, as well as natural gas, and this sector would contribute to obtaining a large financial return.
- Consumer Goods Sector: Companies in FMCG follow a long-term dividend system.
- Telecommunications sector: Telephone and Internet services often provide high and relatively stable profits.
- Energy sector: These are mostly Master Limited Partnerships (MLPs), and must pay all of their dividend obligations to shareholders in order to maintain their privileged tax status.
- Real estate sector: The shareholder gets returns that are much higher than the average dividend, similar to master limited partnerships (MLPs).
forms of dividend distribution
Start-up companies need to reinvest profits to strengthen their business over time, unlike large, strong companies that regularly distribute profits to investors, so the choice is towards large companies, where the company’s net income is distributed to shareholders as profits for them, knowing that it is not It is distributed in its entirety, in order to retain part of the income in investment projects, which is called retained income:
- Cash Dividends: This is the most well-known type of dividend. The company pays cash directly to shareholders.
- Dividend Distribution: An alternative to cash payment, during which shareholders are paid additional shares of the company’s shares, in an amount equivalent to the amount of profits announced for distribution.
- Special dividends: Through this system, dividends are paid on all the company’s ordinary shares, while the process is not repeated like regular profits, and often the company issues dividends for dividends that have accumulated over several years.
- Dividend Reinvestment Programs: Shareholders of DRIPs under this system can reinvest any dividends received back into the company’s stock, but the profits are often less than the first time.
- As well as distributing profits through property: companies distribute profits in the form of a fixed asset, such as equipment, vehicles, and others.
The method of calculating the distribution of dividends, entering the world of stock trading requires sufficient knowledge of this global market, and it is important to choose the right approach and follow it with reliable companies and have a strong name in the stock market.