Dividend in stocks: what is it and which company actually pays dividends?
The dividend is a distribution of profits for stockholders. Their amount is measured as a percentage of the share value, low to medium single-digit percentages are common, in rare cases also around 10%. Mutual funds sometimes call their distributions “dividends”, but that is not a correct term financially or legally. Company participation certificates are also not dividends in the strict sense of the word, but they can be linked to the amount of the company’s stock dividends.
How does the dividend come about?
The board of directors of a stock corporation must propose the dividend payment. The general meeting can then decide on it. That is not mandatory: Stock corporations can also skip dividend payments, they can reduce or increase them compared to the previous year. Failure to pay dividends is more the rule than the exception. This is why companies that have paid dividends for at least 25 years and possibly even increased them year after year are called “dividend champions”. If the general meeting of an AG has decided to pay dividends, this payment in Germany is due no earlier than the third business day (bank working day) after the general meeting’s resolution. Only shareholders will receive a dividend who already held shares in the company at the time of the general meeting.
Dividends can vary in size. Examples are the higher values in 2020:
RTL Group: 9.60%
ProSiebenSat.1 Media: 8.07%
Aareal Bank: 7.08%
Hugo Boss: 6.57%
The companies named here are definitely among the front runners in terms of dividends paid. In other cases around 2 – 4% and sometimes below 1% are paid.
Benefits of dividends
Dividends are like interest on the capital employed, which can be paid even if the share falls in price or the company earns less. Even after years of losses, some public companies pay dividends to keep their shareholders engaged. That can be a controversial decision. Dividend stocks are worthwhile for investors because otherwise there is hardly any interest on invested capital on the capital market. Attention: From a legal point of view, dividends are not interest, because there is no obligation and certainly no mandatory amount of the payment!
Examples of dividend champions
As of March 2021, companies that have paid dividends continuously for at least 25 years include:
Brit. At the. Tobacco
Fresenius Med Care
Lindt & Sprüngli
Anyone who buys these stocks can hope for lasting dividends.