What is a Dividend: Definition, Types, and Payment Procedures

Investing in Stocks: Dividends – Almost everyone who invests in stocks hopes for a high return or rate of return. In the stock market, there are two sorts of returns or rates of return: capital gains and dividends. In general, capital gain refers to the difference between the sale price and the acquisition price of a stock product.

For example, if you pay Rp. 4,000 for a stock goods belonging to Bank Rakyat Indonesia or BRI with the code (BBRI). Then, when BBRI’s price reaches Rp. 4,500, you make a sale. So, the capital gain is 500 per share, or 12.5 percent in percentage terms. That implies you can gain from a rise in the price or value of your BBRI stock.

However, there are more advantages to investing in stocks than just capital gains. Dividends are another type of profit or return that you can obtain. Dividends, in general, are company rights or allotments that benefit people that are investors or shareholders. When purchasing a stock or investing in a firm, investors anticipate the company to make a huge profit or profit. Because corporations that make large profits can distribute gains to investors or shareholders in the form of dividends, this is the case.

As a result, the focus of this paper will be on dividends. Experts discuss the definition of dividends, the different sorts of dividends, the factors that affect obtaining dividends, and how to calculate your payments.


A. System Dividends are defined as a payment made to a person who

Dividends, as stated in the introduction, are payments made to shareholders of a firm that are proportional to the number of shares they possess. The majority of dividends are paid out over a set period of time, however there are times when special or supplemental payouts are paid out outside of that time frame. Dividends will be paid to shareholders, but only after the company has produced significant profits and the board of directors has determined that it is suitable to declare dividends.

The purpose of this dividend is to compensate investors for their efforts in purchasing a company’s stock. This is what causes profit-making companies to distribute profits to investors or shareholders.

Dividends are also considered a shareholder’s right or common stock to obtain a share of a company’s profits, in addition to this general perspective. If a corporation decides to distribute profits in the form of dividends, all of the company’s shareholders will have the same rights regardless of the number of shares they possess. There are a number of reasons why firms do not always distribute all of their profits to shareholders. The most common reason given is to increase the company’s capital.

Because there are more pressing needs, a corporation may choose not to pay dividends. For example, a company’s profits may be emphasized for the sake of business expansion or development, which may explain why it does not pay dividends to its shareholders. However, firms frequently pledge to pay dividends in order to boost shareholder confidence in long-term objectives. Furthermore, the promise of dividend issue has a significant impact on attracting new investors looking for a reliable source of income.

B. Experts’ Perspectives on Dividends

Apart from the above-mentioned broad understanding, below are some professional viewpoints on the definition of dividends:

1. The city of Baridwan (1997)

Dividends, according to Baridwan, are a portion of a profit or profit that can be delivered to shareholders in proportion to the number of shares they possess. The amount of a dividend that shareholders can receive varies from year to year. This sum is determined by the size of the company’s profit margin.

2. Eugene F. Brigham and Scott Besley (2005)

According to Scott Besley and Eugene F. Brigham, a dividend is the distribution of profits earned by a corporation to its shareholders, whether profits or profits were generated during the current period or profits or profits were gained during the preceding period.

3. Donald E. Kieso, Jerry J. Weygandt, and Paul D. Kimmel (2011)

Dividends, according to Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso, are professional distributions made by a corporation to shareholders by modifying the number of shareholdings. This means that shareholders can only profit or profit in proportion to their investment in a company.

Jamie Pratt, No. 4 (2011)

Dividends, according to Jamie Pratt, are payments made to a company’s shareholders in the form of cash, stock, or other property. Dividends are also declared every quarter by the corporation’s board of directors, with the amount published per share.

Nikiforous K. Laopodis

Finally, dividends are financial payments paid by a firm to its shareholders, according to Nikiforous K. Laopodis. The dividend is a reflection of the direct or indirect receipts of the shareholders’ investment in the company.

C. Different Types of Dividends

Following your study of dividends, you should be aware of the following forms of dividends:

1. Dividends in cash

Cash dividends are dividends paid to shareholders in the form of cash or cash equivalents. This sort of payment is known as the most common dividend distribution. Cash dividends are also popular among shareholders because they provide tangible rewards in the form of cash.

The cash dividend distribution period might be anywhere between two and four times per year, depending on the timeframe. For the record, according to applicable legislation, this dividend payout will be taxed.

2. Dividend on Real Estate

Property dividends, often known as goods dividends, are dividends paid in the form of assets. This dividend is a sort of dividend that is rarely paid, owing to the difficulty of the distribution process. Because there is no cash, companies usually distribute dividends in this manner. This could be as a result of cash from one company being used to invest in the stock of another or for inventory purposes.

It is believed that if enough cash is released, the selling price of investments or inventories will fall, causing harm to the company or its shareholders. As a result, the company’s dividends are attempted to be distributed in the form of asset distribution to investors or shareholders.

3. Dividend on Liquidation

Liquidating dividends are dividends paid to shareholders that consist of a portion of the profit and a piece of the return on capital. Liquidating dividends are paid by corporations that intend to shut down their operations, such as joint ventures or businesses that are in bankruptcy.

When a firm falls bankrupt and still has money left over, the money will be allocated to the shareholders. A liquidation dividend is what this is called. However, if the corporation has no remaining money, it will be unable to share anything.

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