When does a company pay dividend
Table Of Content:
what is dividend
Dividend is a way of distribution of profits.
Dvidends are paid
1)When companies make profits; and
2) have enough cash in their balance sheet.
After this criteria the mangement in a meeting decides to declare dividend and takes the necessary aproval from shareholders even, to pay the dividend.
When does a company do not pay Dividend
Company may not give dividends if
1) There is no profit,
2) Even if there is profit,company may not give dividends for:
- If there is shortage of cash,that means company has made profit but it is lying with the debtors.Generally we see in this type of companies Sales is increasing,profits is good but all stuck in the debtors,and debtors are piling up. An investor should be careful investing in such companies.
- Companies which pay regular dividend are no doubt a company having good management.Paying dividend may also mean that the management may not have better future expansion plan or ploughing back of profit is not a good idea in view of management.
0 Comments