Answer Posted / raju
1) Regular Dividend. By dividend we mean regular dividend
paid annually, proposed by the board of directors and
approved by the shareholders in general meeting. It is also
known as final dividend because it is usually paid after
the finalization of accounts. It sis generally paid in cash
as a percentage of paid up capital, say 10 % or 15 % of the
capital. Sometimes, it is paid per share. No dividend is
paid on calls in advance or calls in arrears. The company
is, however, authorised to make provisions in the Articles
prohibiting the payment of dividend on shares having calls
in arrears.
(2) Interim Dividend. If Articles so permit, the directors
may decide to pay dividend at any time between the two
Annual General Meeting before finalizing the accounts. It
is generally declared and paid when company has earned
heavy profits or abnormal profits during the year and
directors which to pay the profits to shareholders. Such
payment of dividend in between the two Annual General
meetings before finalizing the accounts is called Interim
Dividend. No Interim Dividend can be declared or paid
unless depreciation for the full year (not proportionately)
has been provided for. It is, thus,, an extra dividend paid
during the year requiring no need of approval of the Annual
General Meeting. It is paid in cash.
(3) Stock-Dividend. Companies, not having good cash
position, generally pay dividend in the form of shares by
capitalizing the profits of current year and of past years.
Such shares are issued instead of paying dividend in cash
and called 'Bonus Shares'. Basically there is no change in
the equity of shareholders. Certain guidelines have been
used by the company Law Board in respect of Bonus Shares.
(4) Scrip Dividend. Scrip dividends are used when earnings
justify a dividend, but the cash position of the company is
temporarily weak. So, shareholders are issued shares and
debentures of other companies. Such payment of dividend is
called Scrip Dividend. Shareholders generally do not like
such dividend because the shares or debentures, so paid are
worthless for the shareholders as directors would use only
such investment is which were not . Such dividend was
allowed before passing of the Companies (Amendment) Act
1960, but thereafter this unhealthy practice was stopped.
(5) Bond Dividends. In rare instances, dividends are paid
in the form of debentures or bounds or notes for a long-
term period. The effect of such dividend is the same as
that of paying dividend in scrips. The shareholders become
the secured creditors is the bonds has a lien on assets.
(6) Property Dividend. Sometimes, dividend is paid in the
form of asset instead of payment of dividend in cash. The
distribution of dividend is made whenever the asset is no
longer required in the business such as investment or stock
of finished goods.
But, it is, however, important to note that in India,
distribution of dividend is permissible in the form of cash
or bonus shares only. Distribution of dividend in any other
form is not allowed.
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