What is gross dividend, Financial Management

Assignment Help:

Gross dividend

At the ending of the financial year companies will announce the profits or losses that they have earned and a figure for net profit after tax. A company is able to choose either to pay any profit out in dividends or to re-invest it in the business. Dividends are paid out per share and consequently the more shares that you own in a business the more dividend income that you will receive. Using the instance of Buntam plc the figures indicate a gross dividend yield of 5%. This signifies that the dividend paid equals 5% of the share price or eight cents in this case. The term gross income that this is the dividend paid before tax. The equivalent computation for Zellus plc means that the dividend yield of 3.33% is equivalent to a gross dividend payment of nine cents. If the individual shareholder in Buntam plc pays tax at 20% on investment income then he will collect a net dividend of 6.40 cents per share. The company pays this essential rate of tax to the government as an advance payment of its corporation tax liability when it pays out its dividends and so investors receive the dividend after deduction of the basic tax payable.

The gross dividend figure is of significance to an investor as it facilitates direct comparison of the dividend figure and dividend yield paid out by different companies as well as comparison with interest yields on fixed return investments.

The tax liability is determined through the individual circumstances of each investor and so its inclusion would serve only to confuse any comparative analysis. The dividend figure is as well relevant to an investment decision because it is a way of earning income from investments as opposed to capital gains which can only be realised when the investment is sold.

 


Related Discussions:- What is gross dividend

Define decision rule for accepting or rejecting projects, What is the decis...

What is the decision rule for accepting or rejecting proposed projects while using net present value? While using the net present value decision rule any project along with a net

Benefits of niche and specialisation markets, a) Ltd. stands for ‘private l...

a) Ltd. stands for ‘private limited company', i.e. a business with limited liability with shares being issued only to friends and family with the approval of the board of directors

Explain the bird in the hand theory of cash dividends, Explain the bird in ...

Explain the bird in the hand theory of cash dividends. The bird in the hand dividends theory states that dividends received now are better as compared to a promise of future divi

The chinese pension fund system, The Chinese Pension Fund System Mainlan...

The Chinese Pension Fund System Mainland China has a rapidly aging population. This is attributable to two main factors - the one-child policy plus substantial improvements in l

Defne iu.s. companies that benefit from a stronger dollar, What kinds of U....

What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies which import goods from other countries would bene

What are the factors determining the cost of capital, What are the Factors ...

What are the Factors determining the cost of capital There are many factors which impact the cost of capital of any company.  This would mean that cost of capital of any two co

What is risk mitigation and how it is monitored, Q. What is Risk mitigation...

Q. What is Risk mitigation and how it is monitored? 1. When managing risks, there are several risk strategy options to be considered. Risk may be avoided entirely, transferred

Explain about the primary and secondary markets, Explain about the primary ...

Explain about the primary and secondary markets. Primary and secondary markets: A primary market is a financial market wherein new matters of financial securities (both s

State about investment decision, State about Investment decision Dec...

State about Investment decision Decisions relating to investment in both current and capital assets. Finance manager has to evaluate different capital investment proposalsan

Benefits of mentoring for new members of staff, JB has recently joined the ...

JB has recently joined the Finance Department of P Company as a trainee management accountant. As part of the Company's induction, she has been offered a mentor. Though, since JB h

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd