Liquidating distribution to shareholders
Dividends paid does not show up on an income statement but does appear on the balance sheet.
Stock or scrip dividends are those paid out in the form of additional stock shares of the issuing corporation, or another corporation (such as its subsidiary corporation).
Thus, if a person owns 100 shares and the cash dividend is 50 cents per share, the holder of the stock will be paid .
Dividends paid are not classified as an expense, but rather a deduction of retained earnings.
They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield 5 extra shares).
Nothing tangible will be gained if the stock is split because the total number of shares increases, lowering the price of each share, without changing the market capitalization, or total value, of the shares held.
In the United States, it is typically 2 trading days before the record date.
Retained earnings (profits that have not been distributed as dividends) are shown in the shareholders' equity section on the company's balance sheet – the same as its issued share capital.
Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from the fixed schedule dividends.
Dividend cover is calculated by dividing the company's cash flow from operations by the dividend.
This ratio is apparently popular with analysts of income trusts in Canada.