Dividends are paid in the form of cash or stock to the stock holders of a company from the net profits earned by a corporation in the course of the financial year. So, in the first place, to give out dividends, a corporation needs to make high net profits. Dividends are paid on a per share basis to the shareholders and hence more the number of shares you own in the company, more would be your dividend income. The announcement of dividends is made in the annual general meeting of the company. Both the interim as well as the final dividends are finalized by the board of directors of the company.
Though good companies pay consistent dividends, it is not compulsory for firms to pay them. Some firms have a lenient dividend paying policy which means that they pay a good percentage of their total net profits as dividends. Others have a conservative dividend payment policy which means that money earned is kept by the company with itself and is re-invested for better results. One suggestion which is commonly given by investment advisers to people is that one should not invest in a company just for the sake of dividends. Considering the business model and business growth of the company is absolutely essential in today's business environment.
Qualified Dividends
Qualified dividends are those types of dividends to which the capital gains tax levied are very low. The Internal Revenue Service (IRS) has given a clear explanation on the qualified dividends which has made it simple for us to understand their meaning. What the IRS has declared is that any person, who wishes to be taxed under the category of 'qualified dividends' should have held the stocks of the company for more than sixty days. The qualified dividends tax rate can be between 0 to 15 percent. The following are some more pre-requisites for dividends to be included in the 'qualified dividends' category:
The dividend must be paid by a US corporation or an incorporated company in the US possession.
The dividend has been paid on the stock of a foreign company that can be traded on the United States Stock Exchange.
Dividend is paid by a foreign company which is eligible to get the U.S. Tax treaty benefits.
Though good companies pay consistent dividends, it is not compulsory for firms to pay them. Some firms have a lenient dividend paying policy which means that they pay a good percentage of their total net profits as dividends. Others have a conservative dividend payment policy which means that money earned is kept by the company with itself and is re-invested for better results. One suggestion which is commonly given by investment advisers to people is that one should not invest in a company just for the sake of dividends. Considering the business model and business growth of the company is absolutely essential in today's business environment.
Qualified Dividends
Qualified dividends are those types of dividends to which the capital gains tax levied are very low. The Internal Revenue Service (IRS) has given a clear explanation on the qualified dividends which has made it simple for us to understand their meaning. What the IRS has declared is that any person, who wishes to be taxed under the category of 'qualified dividends' should have held the stocks of the company for more than sixty days. The qualified dividends tax rate can be between 0 to 15 percent. The following are some more pre-requisites for dividends to be included in the 'qualified dividends' category:
The dividend must be paid by a US corporation or an incorporated company in the US possession.
The dividend has been paid on the stock of a foreign company that can be traded on the United States Stock Exchange.
Dividend is paid by a foreign company which is eligible to get the U.S. Tax treaty benefits.
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