Dividends mean a portion of a company's profits distributed among shareholders. Dividends may take different forms.
The main types of dividend payments are:
1. DVCA - Cash Dividend (Corporate Action: Dividend - Cash Payment).
The classic format: the company distributes a portion of its profits among shareholders in cash.
The amount is calculated pro rata the number of shares you hold. The funds received are credited into your brokerage account. These funds can be withdrawn, reinvested, or used to purchase other assets.
2.DVSE - Stock Dividend (Corporate Action: Dividend - Stock Payment).
The issuing company pays dividends not in cash, but in additional shares.
The payment is pro rata your stake: the more shares you hold, the more new shares you receive. Your stake in the company does not change - all shareholders receive the same percentage.
3.DRIP - Dividend Reinvestment (Corporate Action: Dividend - Reinvestment).
Cash dividends are automatically converted into new shares.
Funds are not credited into your brokerage account balance, but are automatically used to purchase the issuer's shares. This is a convenient way to gradually increase your investment in a company you like without any extra steps and, often, without fees.
Essential Details to Know
- All of the above transactions are corporate actions originated by the issuing company itself;
- The type of dividend is determined by the issuer's decision; the payment type can be checked in the Broker Report;
- The proportions and terms of payments are determined following the meeting of shareholders.
Important!
In this section, the examples provided by Freedom Finance PLC (hereinafter referred to as the Company) are hypothetical, illustrative, and intended to provide a general explanation of the relevant provisions. These examples are not intended to apply to specific circumstances, do not take into account the individual circumstances and conditions of the Client, and should not be relied upon as the basis for making any investment or other decisions.
The Company assumes no liability for the accuracy, completeness, or interpretation of the information provided, or for any losses the Client may incur as a result of its use. The Company also assumes no liability for any consequences of investment decisions made by the Client based on this information. More detailed risk information is available in Annex 4 of the Brokerage Services Regulations, which is posted on the Company's official website.