dividend

The dividend is usually the part of the profit that a stock corporation (or another corporation ) pays out to its shareholders or shareholders. The legislature does not use the term dividend in shares law but calls it in § 174 para. 2 no. 2 Stock Corporation Act, the "distributable amount". At other corporations, such as the GmbH , there are profit distributions.

Although mutual fund distributions are sometimes referred to as “dividends”, this is not an accurate term because the distributions may include interest-like income. The distributions of participation certificates of a company are not themselves dividends, but are occasionally linked to the dividend amount of a share of the same company.

Decision and payment

The amount of the dividend is proposed by the management board and decided by the general meeting with a simple majority ( Section 174 (1) AktG). Until 2016, the dividend was usually paid on the day after the general meeting. Since Section 58 (4) sentence 2 AktG (new version) came into force on January 1, 2017, the due date will not be due before the third business day following the resolution of the Annual General Meeting - according to Sections 675 n, 675 s and 675 t BGB, this means every banking day . In 2017, all DAX companies paid dividends on the third banking day. A later due date can be stipulated by a resolution of the general meeting or the articles of association. The decisive factor for entitlement to a dividend payment is whether the shareholder had booked the corresponding share in his securities account on the day of the Annual General Meeting or, in the case of registered shares, was entered in the register of shareholders. Different regulations apply in many countries. Sometimes the so-called record date is the key date. In the case of pending stock exchange transactions, the entitlement is determined after the closing day. The last day before the ex-day is the last cum or inclusive day. The ex date is usually the payment date, but it does not have to be. Nevertheless, in such exceptional cases, no dividend entitlement will be acquired from the ex-date. In Germany it is customary to pay out the dividend only once a year. In other countries, multiple distributions up to monthly dividend payments are common. In the US, for example, the quarterly dividend is the common form.

On the ex date, there is usually a discount from the stock exchange price in the amount of the gross dividend. One speaks of the “dividend discount” or that the dividend is “calculated” from the price. However, this does not always have to be the case due to other market factors. In fact, market participants only pay attention to the distribution, but the price is still determined by supply and demand .

The dividend is usually given in currency units per share, for example three euros per share. Sometimes the dividend is also given as a percentage of the nominal value.

In 2019, the 30 DAX companies paid out a total dividend of 38.6 billion euros.

Tax treatment of dividends in Germany

The tax allocation of the dividend is a special question, especially if it has not yet been distributed. It must therefore first be added to the cash flow .

Private individuals in Germany have to tax dividends as income from capital assets with the flat rate tax. Sole proprietorships and partnerships tax dividends according to the so-called partial income method . Often the capital gains tax of 25% (plus 5.5% solidarity surcharge) is deducted before the distribution and paid to the tax office.

Since March 2013, corporations have only been able to receive dividends tax-free if they hold a stake of at least 10% in the company making the distribution at the beginning of the year. Section 8b (4) KStG (new version) is to be applied for the first time to payments received after February 28, 2013. Of the tax-exempt dividends, 5% of the dividend received is taxable as a non-deductible business expense; In fact, only 95% of dividends are exempt from corporation tax.

A minimum participation quota already existed for trade tax . For the tax exemption, the recipient of the dividend must have a stake of at least 15% in the distributing company at the beginning of the respective collection period ( Section 9 No. 2a and 7 GewStG).

Different terms

Since taxes are usually deducted beforehand, i.e. it is a post-tax profit, the term cash dividend is also used, in contrast to the gross dividend before deduction of any taxes. The dividend is usually transferred to the associated account in a securities account . In the case of listed companies, the dividend recipient must be issued with a tax certificate by the paying custodian bank for the taxes withheld; in the case of non-listed companies, the payment and tax certificate are made directly by the distributing company.

The dividends were by the end of 2008, domestic passenger normally both in personal assets than in the business assets after Halbeinkünfteverfahren be taxed as income, since 2009 basically at private flat rate of 25% separate tax rate or after partial-income method to investments that are attributable to the business assets.

It should be noted that the sale of shares corresponding to a stake of 1% or more are to be allocated to income from commercial operations and are therefore subject to the partial income method.

In the case of dividends from foreign stocks, withholding tax is often withheld at the company's registered office (depending on the country, often 15%). The investor has to pay tax on the dividend as with domestic shares, but can either deduct the withholding tax withheld from the tax liability in his German tax return or have it offset as income-related expenses from capital assets.

If the recipient of a dividend is a domestic corporation (e.g. AG or GmbH), the income can be tax-free or taxable, depending on the type of participation in the other corporation.

Benefit from the tax deposit account

If the dividend was distributed as a service from the tax contribution account , the company must mark this distribution as such. This distribution is considered a tax-free repayment of the contributions to the shareholders ( Section 20 (1) No. 1 Sentence 3 EStG ) and reduces the acquisition costs. It is not a taxable income and is therefore not subject to the 25% withholding tax or income tax; it is shown in the tax certificate drawn up by the bank and submitted to the tax office, but does not have to be stated in Annex KAP of the income tax return.

Dividend yield

The dividend yield ( English dividend yield ) is a yield , measured as a percentage of stock price :

${\ displaystyle {\ frac {\ text {Dividend}} {\ text {Share price}}} \ times 100 \, \%}$

It is one of the classic key figures for evaluating a share. The dividend yields of DAX stocks averaged 3 to 4 percent. The dividend yield is the total shareholder return ( english Total Shareholder Return ) to distinguish.

While the dividend yield describes the ratio of the dividend to the current price, the stock yield is a measure of how the value of an equity investment has developed over a period of time and takes into account both the dividends incurred during the period and any price changes that may have occurred. This combination of price development and dividend yield is also referred to as the performance of a share or a (share) index. At this point, it should be noted that the German DAX share index is usually given as a performance index , whereas the American Dow Jones is not. The published dividend yields usually relate to the last dividend paid by the company concerned to the shareholders based on the current price of the share. For an investor who bought the stock cheaper than the current price, this increases his personal dividend yield and vice versa. The DivDAX share index comprises the 15 DAX stock corporations with the highest dividend yield.

example 1

A dividend of three euros per share at 55 euros (yields a dividend yield of 5.5%) is better than a dividend of six euros per share at 125 euros (dividend yield of 4.8%).

Example 2

A share was bought at 20 euros. The current price is 43 euros and the current dividend is 2 euros per share. Then is the published dividend yield and personal dividend yield . ${\ displaystyle {\ tfrac {2 \, \ mathrm {EUR}} {43 \, \ mathrm {EUR}}} \ times 100 \, \% = 4 {,} 7 \, \%}$${\ displaystyle {\ tfrac {2 \, \ mathrm {EUR}} {20 \, \ mathrm {EUR}}} \ times 100 \, \% = 10 \, \%}$

Dividend policy

Dividends are an indicator of a company's economic strength and are a signal for the stock market. Sometimes dividends are therefore distributed even though the company did not make a profit from a business perspective in the past financial year.

Ideally, a company should base its payout ratio on what part of its surplus it cannot invest or pay off debt. This proportion varies from case to case. Companies that are growing strongly, want to pay off debt or have high investment needs in order to maintain their competitive position usually pay no or only a small dividend despite operating profit. If, on the other hand, a company can no longer grow or if it has to make small investments for its operation, it can distribute practically its entire profit after interest and taxes as dividends, provided no company acquisitions are planned. As a result, companies from the second category often have comparatively high dividend yields, although this does not necessarily mean a higher profit or even a more profitable company. Technology companies often fall into the first category, while utilities fall into the second category.

Occasionally it happens that the current dividend is inconsistent with the company's business performance. For example, reinsurance companies have to struggle with the fact that major natural disasters occur every five years on average, which erode the profits otherwise made. In order to keep the shareholders “in line” in such financial years, the dividend is usually paid in full. This is often not done to the detriment of the company, because reinsurers are prepared for such cases and take appropriate reserves into account in the balance sheet.

Dividend rhythm

The dividend rhythm describes the number of distributions within a financial year. Usually dividends are paid annually, semi-annually, quarterly or monthly.

The annual dividend is common in Germany. In the USA, on the other hand, the quarterly dividend dominates, with companies that distribute both semi-annually and monthly. Some companies in Europe increased the dividend rhythm. So increased Novo Nordisk (Denmark), the number of distributions from once to twice a year, Unilever (Netherlands) every six months on a quarterly basis and Total (France) annually over half a year on a quarterly basis.

Dividend in kind

Not only money can be distributed, but also economic goods ( Section 174 (2) No. 2 AktG) or shares in subsidiaries ( Section 58 (5) AktG). In general, the term dividend in kind is used. Often the meals at the general meeting are also referred to as dividends in kind.

Stock dividend

We speak of a stock dividend when the dividend is paid not in cash but by issuing free shares.

Bankruptcy term

In Swiss usage, the term bankruptcy dividend denotes, for example, the amount that the creditor receives for his claim following bankruptcy .

Wiktionary: Dividende  - explanations of meanings, word origins, synonyms, translations

literature

• Sylvia Bös: Commercial balance sheet and tax law treatment of dividends in kind , Schmidt, Berlin 2009, ISBN 978-3-503-11242-5 . (At the same time: Dissertation at the Technical University of Ilmenau in 2008, entitled: Commercial and tax law treatment of dividends in kind ).
• Lothar T. Jasper: Taxation of interest, dividends and other investment income , Stollfuß, Bonn 1990, ISBN 3-08-315302-3 .

Individual evidence

1. See Act amending the Stock Corporation Act ( Stock Corporation Law Amendment 2016 ) of December 22, 2015, Article 1 No. 5, Article 10 Paragraph 1 ( Federal Law Gazette I p. 2565).
2. BT-Drs. 18/4349, 20.
3. DAX dividend calendar 2017/2018. Accessed on August 16, 2017 .
4. Nikolaos Paschos, Sebastian Goslar: “Die Aktienrechtsnovelle 2016 - An Overview.” In: NJW 2016, pp. 359–364.
5. Dividend Study 2019: Top marks and skid marks. Institute for Strategic Finance , DSW and dividendenadel.de, April 10, 2019, accessed on October 6, 2019 .
6. Manfred Wünsche: Examination preparation for the accountant , 6th edition, Springer - Gabler, Wiesbaden 2012, page 99
7. G. Brähler “Transformation Tax Law” Springer 2008, page 284
8. DAX companies - dividend yield 2019 | Statistics. Retrieved January 28, 2019 .
9. What does the quarterly dividend bring for shareholders? In: faz.net. Retrieved July 29, 2018 .
10. Quarterly dividend. In: boerse.de. Retrieved July 29, 2018 .
11. Top 5 Monthly Dividend Stocks for 2018. In: investopedia.com. Retrieved July 29, 2018 .
12. The dividend calendar. In: aktienfinder.net. Retrieved July 29, 2018 .
13. Hunziker / Pellascio, p. 248