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How to calculate dividends?

A novice trader often pays attention to the size of the estimated dividends. The process of forming dividends is quite simple - when a company makes a profit, then a certain part of this profit is paid to the shareholders of this company. In the case of ordinary shares, it is difficult to immediately determine the amount of future dividends. The dividend can be calculated by taking the average dividend for the last series of years as a percentage of net profit. This determines the current amount of the dividend. However, dividends from ordinary shares of a company should not be paid with a broad investment program. In this case, dividends will not be paid even by a company that usually encourages its shareholders. Analyzing the size of dividends, you need to consider that the money that will be paid to shareholders will not be intended for the development of the company. It is also worth making an analysis of the percentage of the company's total profit, which is paid in the form of dividends.

Dividend calculation

  • Dividends are calculated after determining such a parameter as dividend yield. Dividend yield, in turn, is calculated using the formula: Dividend yield is equal to dividends paid for the last year divided by the company's market value multiplied by 100%.
  • Or you can use another way of calculating dividends and dividend yield as follows: divide dividends from ordinary shares over the last year by the cost of this ordinary share multiplied by 100%.
  • Sometimes it is extremely difficult to determine the amount of dividend payments for the past year - namely, for the period before the close of the register, or the immediate payment of dividends, or for the current year.
  • You can also see the advice of analysts on the Internet, but, usually, it is better to make such a forecast yourself. The easiest way to make a forecast of the size of dividends and dividend yield on shares is not ordinary, but preferred. Usually companies undertake to pay 10% of the company's profits. This is a mandatory minimum payment on these shares. It is necessary to divide this 10% share of the company's profit into the existing number of preferred shares.So it turns out the minimum that the company will be willing to pay for the share, and usually the companies do not pay more than this minimum.
  • Sometimes dividends are not taxed. So, such dividends that are accrued in favor of individuals in the form of shares or parts will not be subject to taxation and satisfy such conditions: first, this charge should be static and should not change the size of its parts of all owners, fixed in the authorized fund.
  • Also, the second condition for the non-taxation of dividends is an increase in the authorized fund for the total nominal value of these accrued dividends.

Taxation of dividends

The work of a tax agent during the payment and accrual of dividends is performed by the issuer of the rights of the company or another authorized person on behalf of the issuer, which carries out the payment or accrual of dividends. Taxation of dividends occurs according to a number of rules:

  • The need to withhold and pay taxes on company revenues will be imposed on all residents who pay dividends. Also here are those who are on the simplified taxation system, as well as those who are exempted from paying income taxes for any reason, and indicate which one.Dividend tax will be paid at a rate of 15%, it is at this rate that the amount of dividends, on average, is taxable.
  • It is worth knowing that a non-resident of the country at the time of payment of income in the form of dividends income tax rates will also be 15%. Tax social benefits to income in the form of dividends do not apply, because By law, dividends are not considered salary.
  • So, while dividends are charged, the issuer of the rights of the company will be obliged to withhold income taxes. Thus, the shareholder - a member of the company society, will be paid the amount of dividends, which will be reduced by the amount of income tax.
  • Also, the payment of the advance payment of income tax is not the reason and the reason for non-payment of income tax to individuals.

Dividend payment

Dividends are usually paid after a special decision of the meeting of all the founders of the company, subject to the availability of appropriate financial resources within the time specified by this constituent assembly. Although there are a number of nuances:

  • Before you calculate dividends, you should know that there is a restriction of dividend payments. This restriction is valid once a year and is regulated by the law of the current legislation, where this restriction is established for joint-stock communities.
  • So, after the procedure for distributing profits, approved by the decision of the shareholders' meeting, will be approved, the amount allocated for dividend payments must be accumulated on subaccount 671 until the agreed payment period.
  • Payers of dividends are business communities, for example, joint-stock companies, limited liability companies with additional liability, etc. The founders of these communities can participate in the distribution of profits and receive part of these profits in the form of calculated dividends, the size of which is proportional to the shares of each of the founders .

Now you know how to calculate dividends and the rules for their calculation. We wish you good luck!


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