A dividend, as defined by the Business Dictionary, is “A share of the after-tax profit of a company, distributed to its shareholders…” This is reiterated in the description from the Oxford Dictionary: “A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).”
So in order to pay a dividend, you need to make a profit. Otherwise all your revenue goes to operating expenses, salaries and taxes. And a dividend isn’t paid to just one person or shareholder: if one shareholder gets one, then every shareholder gets one. Dividends are NOT automatic, are NOT paycheques.
Now say you were a shareholder, and you stripped the revenue stream away from a company you own shares in, and in doing so, you reduced its profit to zero, and say you also caused it greater expenses – say by forcing it to pay more for legal advice or transportation and accommodations for out-of-town shareholders – would you still expect a dividend?
Common sense tells us no. No profit: no dividend.* But common sense is an uncommon attribute at our council table.
On March 13’s agenda, there was a letter from Collus-PowerStream saying the board had decided not to pay a dividend for 2015, and would decide about 2016 after it examined the company’s audited financial statements. (on the Rogers TV broadcast, it starts at 0:18:13, just after the lengthy, self-serving “community” announcements… go past Councillor “Sleepy” Ecclestone’s painful “moved by myself” grammatical error to 0:22:22).
This, course, sent The Block into a tizzy. At 0:22:37 Sleepy again does another “moved by myself” gaffe to introduce a motion to request “an explanation of why the board has chose (sic) not to declare a dividend…” and to “express our concern and disappointment.”
Continue reading “Dividends for dummies”