A 15% penalty surcharge on earnings retained in a corporation to avoid the higher personal income taxes to which they would be subject if paid out as dividends to the owners.
Accumulated profits, also known as accumulated earnings, represent the amount of net income that a company has retained over time, after paying out dividends, taxes, and setting aside reserves. This amount is reflected in the appropriation of profits account and can be carried forward to the next year’s accounts.
An Annual General Meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders. It addresses critical governance and financial matters, including the presentation of the company's accounts, director and auditor reports, dividend recommendations, election of directors, and appointments of auditors.
Appropriation in accounting refers to the allocation of net profits of an organization in its accounts. This can include dividends to shareholders, transfers to reserves, and amounts for taxation.
A mutual fund program that allows shareholders to receive a fixed payment each month or each quarter. The payment comes from dividends, including short-term capital gains, and income on securities held by the fund. Long-term capital gains are distributed annually when realized.
A bonus dividend is a special dividend issued to shareholders in addition to the regular dividends, often due to extraordinary circumstances such as a takeover or exceptionally high profits.
Capital distribution refers to the distribution of company’s funds to its shareholders. This usually happens in the form of dividend payments, share buybacks, or return of capital. It signifies how a company returns value to its shareholders.
Cash outflows are the financial transactions where a business expends cash, which is essential for managing liquidity and business operations.
A clawback is a provision in a law or contract that limits or reverses a payment or distribution for specified reasons.
Constructive dividend involves the disallowance or reclassification of a transaction between a closely held corporation and a shareholder, often recharacterizing a loan to a stockholder as a dividend.
Cum rights refer to trading shares that include the rights or entitlements attached to securities, typically related to dividends or other special benefits. Investing in cum rights allows shareholders to receive upcoming dividends or participate in other corporate actions.
A cumulative dividend is a feature often associated with preferred stock, entitling holders to receive dividends in arrears before any dividends can be paid to common stockholders.
A type of preference share that entitles the owner to receive any dividends not paid in previous years, guaranteeing eventual payment before ordinary shares are addressed.
Cumulative Preferred Stock is a type of preferred stock where omitted dividends must be paid out before any dividends can be paid to common stockholders.
The date on which a corporation uses its list of stockholders to mail a dividend check. It is usually two days after the ex-dividend date. Also called record date.
DAX is a stock performance index that includes dividends and is composed of the 30 most actively traded German blue-chip stocks on the Frankfurt Stock Exchange.
A type of ordinary share where dividends are deferred and paid only after other types of ordinary shares have been compensated, often favoring founder members or large profit entitlements.
Distributable profits (or distributable reserves) are the profits of a company that are legally available for distribution as dividends to its shareholders. This includes a company's accumulated realized profits after deducting all realized losses.
Distribution refers to various processes including the payment of dividends, the final settlement of a company's assets upon winding up, allocation of a person's property, and the channeling of goods to consumers.
A distribution to owners represents the transfer of assets from a business to its shareholders or owners, often observed as dividends in the USA.
Dividend cover, or dividend coverage ratio, is a financial metric indicating how many times a company can pay dividends to its ordinary shareholders out of its net profits after tax in the same period. It measures the sustainability of dividend payments.
A tax concept that posits income earned by corporations is taxed at the corporate level and should not be subject to taxation again when distributed as dividends to stockholders, thereby avoiding double taxation of the same income.
The Dividend Growth Model (DGM) is a fundamental method used to estimate the cost of equity by using dividends currently paid along with their projected growth rate.
The Dividend Requirement refers to the amount of annual earnings that a company needs to allocate in order to pay dividends on its preferred stock.
A comprehensive guide to understanding the Dividend Tax in the UK, which was introduced in April 2016 to replace the previous tax credit system.
The choice by a major shareholder to forgo receiving dividend payments from a company, typically made when the company is facing financial constraints.
A dividend warrant is a cheque issued by a company to its shareholders that provides details of dividends paid, including tax deducted and the net amount payable.
A key metric used by investors to evaluate the income generated by an investment relative to its share price, providing insights into the return on investment from dividends.
Dividends Payable are dividends that have been declared by a company but not yet paid. They appear as an appropriation in the profit and loss account and as a current liability in the balance sheet.
Double Taxation refers to the process under federal tax law where earnings are taxed at the corporate level and then taxed again as dividends of stockholders.
Drawings refer to the withdrawal of assets, typically cash or goods, from an unincorporated business by its owner. This concept is essential in differentiating between unincorporated businesses and corporations, and comprehending how owners can access business assets.
Earned Surplus, also known as Retained Earnings, represents the portion of net income that is retained by a company rather than distributed to its shareholders as dividends. These retained earnings are reinvested in the business or used to pay off debt.
Earnings and Profits refers to the economic capacity of a corporation to make a distribution to shareholders that is not considered a return of capital. If distributed, it constitutes a taxable dividend to the shareholder to the extent of current and accumulated earnings and profits.
The profit a company generates that is available for distribution as dividends to the holders of ordinary shares.
An equity share, also known as an ordinary share, represents an ownership interest in a company, granting the holder voting rights, dividends, and a claim on assets upon liquidation.
Ex-dividend is a stock trading term indicating that a stock is trading without the value of its next dividend payment. Dividends are a portion of a company's earnings distributed to shareholders.
Extraordinary dividends are dividends of unusual form and amount, paid at unscheduled times from accumulated surplus. They are typically larger than normal dividends and can occur due to specific financial events or exceptional earnings.
A final dividend is a dividend declared at the company's annual general meeting (AGM) upon the recommendation of the company’s directors. It represents the distribution of profits that is subject to shareholders' approval and appears as a current liability on the balance sheet until paid.
Quantitative measures that help determine whether a company or group is likely to meet its financial obligations, including interest, dividends, and capital repayments.
Fixed-income investments are financial instruments that provide a fixed rate of return in the form of periodic interest or dividends until maturity.
U.S. tax form used by payers to report various types of income other than wages, salaries, and tips. Examples include interest, dividends, royalties, capital gains, and miscellaneous income.
Understanding the concept of 'franked' in accounting, particularly within the context of dividends, and its implications on tax liabilities.
Franked Investment Income refers to dividends and other distributions from UK companies that, under the imputation system of taxation, were subject to corporation tax only once and exempt from further tax when received by other companies.
Funds from operations (FFO) is a financial performance metric primarily used by real estate investment trusts (REITs) to define the cash generated by their operations. It specifically excludes the depreciation and amortization that obscures the actual cash earnings of these types of entities. FFO is essential to assess a REIT’s capability to pay dividends to its shareholders.
The total of the gross dividends paid by a company in a year divided by the total number of ordinary shares on which the dividend is paid.
Group income refers to a dividend paid by one group company to another within the same corporate structure. These dividends received are not subject to corporation tax.
A growth stock is a type of stock that has exhibited faster than average gains in earnings over recent years and is expected to continue showcasing high levels of profit growth. These stocks often come with higher risks but offer potentially greater returns compared to average stocks.
An illegal dividend is a dividend declared by a corporation's board of directors in violation of its charter or state laws, typically including dividends paid out of capital surplus or those that would render the corporation insolvent.
In-kind distribution refers to the distribution of assets or property directly to beneficiaries, rather than converting those assets to cash and distributing the proceeds.
An information return is a document that businesses, organizations, and entities must submit to the IRS to report certain types of payments made during the year. While it does not compute the actual tax liability of a taxpayer or accompany the payment of taxes, it provides key details that are relevant for tax calculations. Common examples include Forms 1099, W-2, and others.
An insurance company, also referred to as an insurer, is an organization that underwrites insurance policies. There are two principal types of insurance companies: mutual and stock.
Investment income refers to the earnings generated from various types of investments, including dividends, interest, and gains made from the sale of investment properties.
A junior issue refers to a type of debt or equity that is subordinate in claim to another issue, particularly in terms of dividends, interest, principal, or security in the event of liquidation.
A managed service company (MSC) is a type of business entity that primarily provides the services of an individual while compensating that individual through dividends and expense payments rather than a traditional salary. Changes in tax law from 2007 have brought PAYE regulations to apply to these companies.
Minority interest, also known as non-controlling interest, represents the shareholding of individual shareholders in a company where more than 50% is owned by a holding company. These shareholders are entitled to profits in the form of dividends but do not have significant influence over company policies.
A financial institution similar to a Savings and Loan Association (S&L) but organized as a cooperative. It is owned by its members, with deposits representing shares. Members, as shareholders, vote on the association’s affairs and receive income in the form of dividends.
A type of preference share that does not entitle shareholders to receive omitted dividends from previous years.
A non-ratio covenant is a form of covenant in a loan agreement that includes conditions relating to the payment of dividends, the granting of guarantees, disposal of assets, change of ownership, and a negative pledge.
Nonbusiness income refers to earnings derived from passive sources such as interest, dividends, and nonbusiness capital gains, primarily used in taxation to calculate the net operating loss deduction. It includes income from investment assets separate from apportionment in multistate corporations.
The Official List refers to two primary components within the London Stock Exchange framework: a comprehensive list of all traded securities and a daily record of transactions, dividends, rights issues, prices, and other relevant data.
An omitted dividend refers to a dividend that was scheduled to be declared by a corporation but was not voted for the time being by the board of directors. This situation often arises when a company faces financial difficulty and decides it is more important to conserve cash than to pay a dividend to shareholders.
Outstanding capital stock refers to the total shares of a corporation that are currently held by all its shareholders, including retail investors, institutional investors, and company insiders. It is calculated by subtracting the number of treasury shares from the total issued shares.
Overcapitalization arises when a company has more capital than it can efficiently use in its operations, often leading to financial inefficiencies such as excessive interest charges or diluted dividends.
A Participating Insurance Policy is a type of life insurance policy that pays dividends to the policyholder. These dividends are typically a share of the insurer's profits and can be taken in cash, used to reduce premiums, or reinvested back into the policy.
An insurance coverage type that allows the insured to receive dividends based on the company's earnings, which can be used to reduce premium payments.
Participating preferred stock is a type of preferred stock that not only pays a specified dividend but also entitles the holder to participate with common shareholders in additional earnings distributions under certain conditions.
A dividend customarily paid on common shares that the board of directors fails to declare, usually due to financial difficulties at the company; also referred to as an omitted dividend. It differs in implications when associated with cumulative preferred stocks, where the passed dividends accrue until paid.
Passive investment income refers to the earnings derived from investments in which the individual or entity does not actively participate. This includes royalties, rents, dividends, interest, annuities, and gains from the sale of stocks and securities.
The payout ratio represents the percentage of a firm's profits that is distributed to shareholders in the form of dividends. This metric provides insight into how much money a company returns to its shareholders compared to how much it retains for reinvestment and other corporate purposes.
A type of mutual fund that primarily focuses on achieving high capital growth by investing in high-growth companies that typically pay small or no dividends.
Performance stock, also known as growth stock, refers to equity in companies perceived by investors as having potential for significant value appreciation. These stocks usually either pay small dividends or no dividends at all.
Ploughed-back profits, also known as retained earnings, are the portion of net income that is not distributed to shareholders as dividends but is kept within the company to reinvest in its core operations, pay off debt, or reserve for future use.
Plow back refers to the practice of reinvesting a company's earnings back into the business rather than distributing those profits as dividends to shareholders. Typically employed by smaller, fast-growing companies, plow back is a strategy aimed at fueling further growth and expansion.
Portfolio income in taxation includes interest, dividends, royalties, and gains and losses from investments. It distinguishes between passive, active, and portfolio income, indicating that passive activity losses may not be offset against active or portfolio income.
A preference dividend is a type of dividend that is paid to holders of preference shares and often carries preferential rights compared to common share dividends. This term is closely associated with cumulative preference shares, especially concerning unpaid dividends from prior periods.
Preference share capital refers to the portion of a company's capital that comes from issuing preference shares, which give holders preferential dividends but typically lack voting rights.
Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders and the shares usually do not carry voting rights.
The Price-Dividend Ratio (P/D Ratio) is a financial metric used to determine the relative valuation of a company's stock by comparing its current share price to the dividends it pays to shareholders.
The Price-Dividend Ratio (PDR), also known as the Price/Dividend (P/D) ratio, is the current market price of a company's share divided by the dividend per share for the previous year. It measures the investment value of the share.
A type of preferred stock that has a higher claim on assets and dividends compared to other issues of preferred stock or common stock, often referred to as preference shares.
A Profit and Loss Appropriation Account is a financial statement showing how the net profits or losses have been dealt with in a given period.
Profits available for distribution refer to the earnings or surplus that a company can allocate to its shareholders in the form of dividends or other forms of payouts.
A proposed dividend is a dividend that has been recommended by the directors of a company but has not yet been approved by the shareholders or paid to the shareholders.
The term 'quarterly' commonly refers to events, processes, or publications occurring every three months, but it holds special significance in the contexts of business, finance, and securities.
A REIT, or Real Estate Investment Trust, is a company that owns, operates, or finances income-producing real estate.
A Regulated Investment Company (RIC), such as a mutual fund or Real Estate Investment Trust (REIT), is eligible under Regulation M of the Internal Revenue Service to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders to be taxed at the personal level, thereby avoiding double taxation on corporations and stockholders.
In accounting, a reserve refers to a part of a company's capital, other than its share capital. This capital can largely arise from retained profits or from the issuance of share capital at more than its nominal value. Reserves differ from provisions as they represent undistributed surpluses, with some being non-distributable. Directors may earmark these funds for specific purposes.
Retained earnings represent the portion of net income that a company retains, rather than distributing it to shareholders as dividends, to reinvest in its core business or to pay off debt.
Retained earnings refer to the portion of a company's profit that is held back and not distributed to shareholders as dividends. These earnings are reinvested in the business for growth, debt reduction, or other corporate purposes.
A statement that provides a reconciliation of the beginning and ending balances in the retained earnings account on a company's balance sheet.
An account used to indicate that a portion of retained earnings is not available for dividends but is earmarked for specific purposes.
A return of capital refers to a distribution from a corporation to its shareholders that is not paid out of the corporation's earnings and profits. It represents a return of the shareholders' investment in the stock of the company.
A revenue reserve is a distributable reserve, meaning it is part of a company's retained earnings that can be distributed to shareholders in the form of dividends or used to cover future uncertainties and contingencies.
Running yield, often referred to simply as yield, is a financial metric used to measure the annual income generated by an investment relative to its current market price.
A type of bank, prevalent on the East Coast and in the Midwest, primarily offering time-savings accounts. These banks are typically owned by their depositors, who receive dividends in the form of interest on their accounts. Their functions are similar to those of Savings and Loan Associations (S&Ls).
A shareholder, also known as a stockholder, is an individual or entity that legally owns one or more shares of stock in a public or private corporation. Shareholders are entitled to certain rights, such as voting on corporate matters and receiving dividends, if distributed.
Benefits offered by a company to its shareholders as a reward for their loyalty. The benefits are given in addition to dividends and are tax-free.
Shares represent units of ownership in a company, conferring certain rights such as earning dividends and voting in company matters. They can differ in type, such as ordinary shares and preference shares, and their trading is subject to various regulations depending on whether the company is public or private.
A financial statement that combines the income statement and the statement of retained earnings, detailing a company's profit, dividends, and equity changes during a period, as outlined by the Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102, Section 6).
A Stock Insurance Company is a type of insurance company that is owned by stockholders. These stockholders receive earnings in the form of shareholder dividends. However, under state laws, the interests of policyholders take precedence over those of stockholders.
