Calculation of dividends: basic definitions, size and rules for payment of dividends, taxation. Dividend yield Dividend yield formula

Dividend yield is one of the most important indicators for a dividend investor. When assessing the dividend attractiveness of shares, attention is always paid to it. Let's look at it in more detail.

What it is

Dividend yield is a financial indicator that is expressed as a ratio dividends paid To current value stock. Indicated as a percentage.

If dividend yield is spoken of in the past tense, it means the last share price before dividend cut-off .

If the size of future dividends is not known, then in this case we can assume that it will be the same as last year. But this approach is not reliable: the company can significantly reduce the size of dividends or even will stop paying them. Therefore, if you expect a certain dividend yield from a company in the future, then it would be a good idea to familiarize yourself with its financial condition and dividend history.

Calculation formula

Dividend yield is calculated as number of dividends that the company will pay for the year, divided by share price. In this case, it is enough to take only 1 share.

The formula is as follows: (DIVIDEND AMOUNT PER 1 SHARE) / (VALUE OF 1 SHARE) * 100%

As you understand, the value of a stock is constantly changing (read also what affects the value of shares), therefore the dividend yield will change.

What affects dividend yield

From the formula above it follows that the higher the dividend size, the higher the dividend yield. Moreover, if the price of shares rises, then the dividend yield falls.

Overall, don't worry about it only on dividend yield. If the company's shares grow, then it will be even more pleasant for investors.

Extremely high dividend yield should get you alarm. Most likely, the company is doing poorly and they may soon cut dividends or even scale back the business. A similar story happened with General Electric, which cut its quarterly dividend from 24 cents per share to 12 cents. Moreover, this decrease may not be the last.

Therefore, I draw your attention once again: don't just chase dividends, pay attention to the company’s business and its prospects.

Why is this indicator important?

Dividend yield allows you to evaluate your long-term portfolio relative to other financial instruments. For example, you bought shares of company X for 100,000 rubles, its dividend yield is 7%. This allows you to be sure that you will receive your 7,000 rubles in any case. Therefore, even if the price of the company’s shares drops, you will receive real money in your bank account.

Dividend yield and inflation

Since state central banks target inflation with a key rate (both the Russian Central Bank and the American Federal Reserve do so), when inflation is high, the key rate rises. Along with the key rate, the yield on government securities is rising. Large investment funds and banks can transfer part of their funds from shares to bonds - and this will trigger an increase in the dividend yield of shares (but their value will also fall).

This rule does not always apply, since if a company shows good growth, then its shares will not be sold. But if they were held only for the sake of dividends, then an increase in the key rate will also cause an increase in dividend yield.

For example, the dividend yields of US telecoms AT&T and Verizon increased significantly after the Federal Reserve carried out several key rate hikes.

Examples

Using the example of several companies, let's look at how dividend yield is calculated.

In 2018, Sberbank announced a payment of 12 rubles per 1 ordinary share. The registry closes on June 25. On May 30, shares were traded at a price of 221 rubles per security. Add it up and get (12 / 221) * 100% = 5.43%. Thus, as of May 30 Sberbank's dividend yield was 5.43%. But at the same time, on February 18, 1 security was traded at a price of 277 rubles per share. If you bought Sberbank shares in February, the dividend yield would be 12 / 277) * 100% = 4.33% per annum. That is, a whole percentage less.

As you can see, the moment of purchase and the current price affect the dividend yield.

Leaders

The leaders in dividend yield on the Russian market are the following companies:

Aeroflot. The profitability turned out to be high, but due to the fact that the stock fell very much in price.

• Rostelecom

For detailed statistics, you can refer to the company list page and see the dividend yield for each of them. You can also go to the year you are interested in (for example) and see all dividend payments for that year.

Dividend yield in the US market

The dividend yield of American stocks is, on average, lower than that of Russian ones. This is due to the following factors:

There is significantly more money concentrated in American stocks. Shares are “overbought”

The key rate is lower. Loans are cheaper and deposit rates are lower

Low inflation

If we consider the profitability of blue chips in the American market using the S&P500 index as an example, the average dividend yield fluctuates around 1.6%. But here it is important to take into account the following fact: many large American companies do not pay dividends. Of the 6 largest companies (Apple, Amazon, Microsoft, Google, Berkshire Hathaway, Facebook), only 2 pay dividends - Apple and Microsoft.

Questions and answers

Is it possible to compare dividend yield with a deposit?

Yes and no. Dividends on current shares may increase, but the rate on current deposits may not. In addition, banks do not seek to increase deposit rates; it is not profitable for them. They try to pay enough so that people give them their savings. Deposit rates always follow inflation and will never be significantly ahead of it over a long period.

But there are also similarities. The dividend yield allows you to predict how much income you will receive in a year. And if this income is higher than the deposit rate, then you will receive more money in your hands than if you put it in the bank.

But remember that the value of shares may fall, and dividends themselves are always subject to tax.

So there are much more differences than similarities.

Conclusion

Dividend yield is a very important indicator. The more reliable a company and its corporate governance, the more predictable its dividend policy. There is no point in focusing on dividend earnings if the company is “stormy” from year to year. Today we pay shareholders, tomorrow we don’t, the day after tomorrow something else. Therefore, in addition to dividend yield, always pay attention to the dividend payment history of companies and their charter.

The dividend yield of Russian companies is on average higher than that of American companies, but at the same time, the American market is more attentive to its shareholders and companies try to increase dividend payments every year (there is even a special term - “dividend aristocrats”, these are those companies that have increased payments for at least 25 years in a row ). In Russia, dividends are usually tied to net profit indicators, which makes them very unstable.

Therefore, be sure to combine stocks from different countries in your investment portfolio.

And remember that every ruble that the company pays to shareholders is a ruble that the company will not be able to invest in expanding production and increasing profits.

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Dividend yield. Dividend Yield)is the ratio of a stock's dividend to its share price, measured as a percentage.

Formula

Dividend Yield = Annual Dividend / Spot Share Price

For example, let's say an investor has 800 shares of XYZ Company, which pays$ 2.3 dividends per share per year. If the current stock price is $18, then using the above formula, dividend yield on XYZ company shares:

$2.3 / $18.0 = .128 = 12.8%

There is an inverse relationship between profitability and stock price. For example, if the stock price rose to $25, the dividend yield would be $2.3/$25 or 9.2%. Buying 800 shares would cost $20,000 (down from the original cost of $14,400), but the return on investment would drop from 12.8% to 9.2%.

Analysis

Some investors view dividend yield as“ interest rate” on investments in shares.

Dividend yield can also be a sign of a company's stability and often maintains a firm's share price at a certain level. Typically, only profitable companies pay dividends. Therefore, companies that have paid significant dividends over a long period of time, are both more sustainable investments. So, if events occur that cause short-term damage to the share price, the attractiveness of the dividend combined with the stability of the company can support the price somewhat.

Dividend payout ratio

Dividend payout ratio. Dividend Payout Ratio) is the amount of dividends paid to shareholders in relation to the total net profit that the company generates. In other words, the dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends.

Dividend Payout Ratio = Dividends / Net Profit

Company A earned a net profit of$ 70,000 per year. It was allocated for dividends$ 20,000. The DPR calculation is as follows:

DPR =$ 20,000 / $ 70,000 = 28,6%

Thus, a dividend payout ratio of 28.6% shows that Company A pays out 28.6% of its net income to shareholders in the form of dividends. Remaining 71,4 % of net income is retained to finance growth and is called retained earnings.

The dividend payout ratio helps investors determine which companies best suit their investment goals. When shareholders invest in a company, the return on their investment comes from 2 sources: 1) dividends and 2) capital gains.

A high DPR means that the company reinvests less profits back into the company, paying out a relatively larger portion of its earnings as dividends. Such companies tend to attract investors who prefer a constant, stable income stream., rather than high potential for share price growth.

A low DPR means that the company is reinvesting more funds back into expanding its business. By investing in business growth, the issuer will be able to generate higher capital gains for investors in the future. Therefore, these types of companies tend to attract investors who are interested in significant share price growth and less interested in dividend income.

Key dividend dates

Declaration date – the day on which the company's board of directors announces the payment of the next dividend. This is the least important date for investors.

Register closing date (Record date) – shareholders who have duly registered their ownership of the share before the closing date of the register will receive dividends. Shareholders who are not registered on this date will not receive dividends. Registration in most countries is automated.

Ex-dividend date – An investor must own the stock before the ex-dividend date to receive the next scheduled dividend.

Payment date – the day on which dividends are sent to the company's shareholders or credited to brokerage accounts.

Dividends are part of the profit that is distributed among the founders. Calculated per share. The paid profit is distributed in proportion to the number of securities owned by a particular person. The entire process associated with the accrual and calculation of amounts is regulated by Federal Law No. 26 “On Joint Stock Companies”.

Taxation

According to Art. 43 of the Tax Code of the Russian Federation, a dividend is the income received by a participant from an enterprise when distributing funds that remain after taxation, depending on the type and quantity of securities.

Dividends do not include payments:

• which are carried out upon liquidation of the enterprise, to the participant in kind, in cash, not exceeding the amount of the shareholder’s contribution to the capital;
• in the form of transfer of ownership of the Central Bank;
• a non-profit structure for the implementation of non-entrepreneurial activities or produced by companies whose capital consists of contributions.

Who is entitled to receive dividends? Income is paid only to holders

Types of shares

The security confirms an individual’s contribution to the enterprise and gives the right to receive a share of the profit. Therefore, the capital of a joint-stock company consists of outstanding shares. Federal Law No. 26 defines two types of these securities: ordinary and privileged. The share of the latter in the total capital of the organization should not exceed 25%.

All shares are registered, i.e. they are assigned to the owners. When exercising the right of participants to purchase securities sold by another participant, and during the consolidation of shares, fractional securities may arise. Their accounting is carried out according to general rules. If a person buys two or more fractional securities of the same type, then they form one whole.

Ordinary shares allow their owners to take part in meetings of participants, vote, receive income in the form of dividends, and in the event of reorganization, part of the property. The amount of payments depends on the financial status of the organization.

A preferred share gives the owner the right to receive a fixed payment. Its size is set as a percentage of the value of the security. They cannot participate in meetings or in any way influence the activities of the organization. The amount of payment due upon liquidation of an enterprise is regulated by the charter. If the organization provides for several types of shares, the charter must also determine the order, timing and amount of payments.

How are dividends calculated?

Income can be paid every quarter, half year or year. The decision to transfer funds must be made during the next quarter after the reporting period at a meeting of shareholders. The amount of payment should not exceed that recommended by the board of directors. The terms and procedure for settlements are determined by the charter. If these conditions are not specified in the document, then the period should not exceed two months from the date of the decision on payment.

Limits

In Art. 43 Federal Law No. 26 describes restrictions on payment. In particular, an organization cannot declare the payment of income under the Central Bank:

• until full payment of the management company;
• before the redemption of securities that are subject to redemption;
• if on the day the decision is made there is a threat of bankruptcy of the enterprise or if it may arise after the transfer of funds;
• if the value of net assets is less than its capital, reserve fund, or if such a situation may arise after the transfer of funds;
• if we are talking about the Central Bank, the amount of payments for which is not determined by the charter.

It is also prohibited to pay dividends on preferred shares unless income is first paid to holders of ordinary securities. Typically, the decision on payment is made based on the results of work for the year.

How are dividends calculated?

The income to be paid is determined based on the interest rate:

- % = Profit / Charter capital x 100%.

Example

22 thousand rubles are allocated for the payment of dividends for 2015. The organization's capital is 10 thousand rubles, the nominal value is 20 rubles, the number of securities is 50 thousand pieces.

% = (22:10) x 100% = 220%.

440 rubles per share. (22:50).

BOO

Dividends are income that is paid from net profit remaining after taxes. They can be accumulated in a special payment. Payment is made in cash or other property. Let's look at how dividend income is calculated and recorded in accounting:

• DT84 “Uncovered loss” CT75 “Calculations for the payment of income” - dividends are accrued to shareholders who are not employees.
• DT84 KT70 “Settlements with personnel” - income accrued to shareholders-employees.
• DT75 (70) KT68 “Personal Tax Calculations” - personal income tax is withheld from the accrued amounts.
• DT75 (70) KT51 (50) - accrual of “net” dividends to shareholders.

Let's consider how income (dividends) paid by property is recorded:

• DT84 KT75 (70) - accrual of dividends.
• DT75 (70) KT68 - personal income tax is withheld from the accrued amounts.
• DT75 (70) KT90 (91 “Other income”) - the value of property with VAT, which was transferred to repay debts on dividend payments.
• DT90 (91) KT68 - VAT on transferred property is taken into account.
• DT90, KT43 (41, 20, 26) - the cost of the transferred property is written off.
• DT91 KT01 (10) - the value of assets issued in the form of dividends is written off.

Upon liquidation of a JSC, payment of accrued dividends on all shares, except ordinary shares, is carried out in the second place, simultaneously with the repayment of the liquidation value of the Central Bank.

Example

The procedure for taxation of dividends depends on the income the organization has from equity participation in other enterprises and on whether the individual has Russian Federation status.

Let's say the company received income from equity participation during the year. The charter capital consists of 1,000 shares. Of these, 700 pieces belong to Russian enterprises, 50 pieces. - foreign enterprises, 200 pcs. - resident individuals and 50 pcs. - non-resident individual. The meeting of shareholders decided to pay 100 rubles per share. The organization received dividends from a third-party company in the amount of 10 thousand rubles. The amount to be distributed is: 100 x 1,000 = 100 thousand rubles.

The income to be paid is 5 thousand rubles (100 rubles x 50 pcs.). Since individuals and organizations each own 50 pcs. shares, then the total payment amount is 10 thousand rubles. Accordingly, residents are entitled to 90 thousand rubles. (100 rub. x (700 + 200) pcs.).

WELL

Taxation of income in the form of dividends received by individuals is regulated by letter of the Ministry of Taxes and Taxes of the Russian Federation No. SA-6-04/942. NPP is calculated for the calendar year, and the reporting period is considered every quarter. For enterprises that calculate advance payments every month based on the profit received, this same period is the calculation period. Thus, for calculating the NPP when distributing income for the second quarter of 2015, the reporting period will be six months of 2015, and the previous one will be the first quarter of 2015. Tax on dividend income is calculated at a rate of 9%.

Funds must be transferred to the budget no later than the day the money is received from the bank or the day the funds are transferred to the account. It depends on which of the listed dates came first. If dividends are transferred to a credit institution or sent by postal order, the date of receipt of income is the day the funds are transferred.

Example

For 2015, the CJSC received a profit in the amount of 266 thousand rubles. The meeting of shareholders decided to use this amount to pay income to the founders. The management company is divided into 100 shares, of which 60 pieces belong to the head of the organization, 40 pieces. - non-resident individual. The following entries are generated in the balance sheet:

DT84 KT70 - 159.6 thousand rubles. (266: 100 x 60) - dividends accrued to the director.

The amount of personal income tax payable is: 159.6 x 0.09 = 14,364 rubles.

Postings:

DT84 KT75-2 - 106.4 thousand rubles. (266: 100 x 40) - income is accrued to a non-resident.

Taxation of non-resident income

If an avoidance agreement is concluded between the Russian Federation and another country, the tax rate is 9%. If there is no such legislation, then the amount paid is subject to tax at a rate of 15%. If the specified act is available, then the tax amount is calculated using the formula:

Personal income tax to be withheld = ((Nd: Od) x Od - Pd) x 9%:

• Nd - accrued dividends;
• Od - total payment amount;
• Pd - the amount of dividends received.

Example

For 2015, the CJSC received a profit in the amount of 266 thousand rubles. This amount includes 150 thousand rubles. income from equity participation. The meeting of shareholders decided to pay dividends. Income will be distributed between two founders: a director and a non-resident. The first one owns 60 shares, and the second one owns 40 shares. Let's look at the entries in the accounting system:

• DT84 KT70 - 159.6 thousand rubles. (266: 100 x 60) - dividends are accrued to the manager.
• DT84 KT75-2 - 106.4 thousand rubles. (266: 100 x 40) - dividends are accrued to a non-resident.

The amount of tax payable on the founder’s income is calculated as follows:

106.4 x 0.15 = 15.96 thousand rubles.

- (266 x 0.6: 266) x (266 - 150) x 0.09 = 6.264 thousand rubles.

Personal income tax at a rate of 30%

Taxation of income at a higher rate is provided only if there is no information about the holders of securities. This situation may arise if the interests of the founders are represented by an authorized person or depository. All calculations are carried out according to the formula:

Personal income tax = Amount of dividends x 30%.

The tax amount must be transferred within a month from the date of occurrence of one of the following events:

• end of the tax period;
• expiration of the contract under which the agent pays income to the holder;
• payment of funds.

Special cases

Even if one of the founders is another organization, you still need to withhold personal income tax. The legislation does not provide any restrictions in this case. Depending on whether the founder is a resident or not, dividends are taxed on a general basis.

Income received through inheritance is subject to taxation under special conditions. The object of inheritance is the right to receive funds. Therefore, personal income tax must be withheld from the amount paid at a rate of 9% or 15% and transferred to the budget in a timely manner.

The basis for calculating the tax is the money actually received and the amount of funds that the founders received the right to dispose of. The date of receipt of income is the date of payment. Therefore, the day when the shareholder refused to receive income is considered the date the organization received funds. Such amounts are also subject to taxation on a general basis.

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Dividend income is the most common type of distribution of corporate profits among the owners of its shares. Dividends are most often paid in cash, but can also be received in the form of shares, stock options, debt payments, property or even services. The most reliable and stable companies offer cash dividends to their shareholders in the form of a fixed amount per share in proportion to the total value of all shares they own.

Growing companies rarely offer cash dividends because all their profits are reinvested to maintain high growth rates. Distributions from unit-based investment funds can also be treated as dividend income. They pay dividends as a percentage of the income generated by an existing portfolio of holdings.

Profit distribution

The distribution of a portion of a company's profits by decision of the Board of Directors is usually stated in cash, but can be expressed as a percentage of the current market price, which is called the dividend yield. Thus, dividend income can generally be characterized as "dividends per share" (DPS).

Dividends can be collected prior to the company's annual general meeting and final financial statements. Interim dividends usually accompany the corporation's interim financial statements. Dividend yield takes into account all dividends received during the last 12 months. Thus, this amount also includes interim (usually quarterly) payments.

Dividend income represents the actual profit received by the owner of the shares. It is comparable to other stocks, a market sector or the market as a whole, or the returns of other types of investments such as government bonds. The latter have a higher profitability than shares, but the income from them is fixed, and the profit distributed among the shares can increase along with the development and strengthening of the corporation. That's what shareholders hope for.

Dividend income: forms of payment

Cash dividends, the most common form of payment, are paid in foreign currency via electronic funds transfer or check. Such distributions, a form of investment income, are generally taxed in the year they are received. This is the most common method of exchanging corporate profits with the company’s shareholders, used, for example, in Tatneft or the IDGC holding.


Stocks, as a form of dividend, are paid in the form of additional shares of the issuer's corporation or another corporation, such as a subsidiary. They are usually issued in proportion to the shares owned by the shareholder. For example, for every 100 shares, a 5% dividend will yield 5 additional shares.

Dividend income in the form of reinvestment is an investment option. The investor does not receive quarterly dividends directly in cash. Instead, the investor's dividends are reinvested into fixed assets. This allows you to receive investment income from dividends. In some cases, a shareholder may not have to pay taxes on reinvested dividends, but in most cases they do. In many countries, dividend income is taxed, although at a lower rate than usual.