As a shareholder, your primary concern is how to earn returns from your investments. Listed companies typically distribute a portion of their profits to shareholders after profit realization, which we commonly refer to as dividends or distributions. But did you know? How to calculate dividends directly affects how much money you receive. Today, we will take you deep into understanding the logic behind stock dividends and cash dividends.
Two Ways of Dividends: Stock or Cash?
When a listed company decides to return profits to investors, there are mainly two options.
First: Distribute Stocks (also called Bonus Shares)
The company issues free shares into your account, increasing your total shareholding, known as “stock dividends.” This method has a lower threshold; the company does not need large cash outflows, and can implement it even if cash on hand is insufficient.
Second: Distribute Cash (also called Dividend Payment)
The company directly deposits cash into your account, known as “cash dividends.” This method requires strict conditions; the company must have sufficient earnings and cash flow, and it must not affect normal operations.
Which method to choose depends on the company’s current situation and development stage.
How to Calculate Dividends? Practical Case Step-by-Step
Once you understand the dividend distribution methods, let’s look at how to calculate dividends in detail.
Stock Dividend Calculation
Suppose you hold 1,000 shares of a listed company, which decides to distribute stock dividends at a ratio of 1 share for every 10 shares held.
Calculation: (1000 shares ÷ 10) × 1 = 100 shares
After distribution, your total shares become: 1000 + 100 = 1100 shares
Cash Dividend Calculation
Holding 1000 shares, the company decides to pay 5 yuan per share.
Calculation: 1000 shares × 5 yuan = 5000 yuan
Tax Adjustment: If 5% personal income tax is deducted, the actual amount received is 5000 × 0.95 = 4750 yuan
Hybrid Distribution
Some companies use both methods simultaneously. For example, with 1000 shares, distributing 1 bonus share per 10 shares and paying 1.5 yuan cash, you end up with: 100 shares of stock + 1500 yuan cash
Complete Process and Timing of Dividend Distribution
To receive dividends on time, you need to understand the significance of key dates.
Announcement Date: The company announces its dividend distribution plan.
Record Date: The most critical day. Shareholders holding the stock on or before this date are eligible to participate in the dividend distribution.
Ex-Dividend and Ex-Rights Date: Usually the trading day after the record date. Investors buying shares on or after this date cannot enjoy the current dividend, but existing shareholders selling on this date do not affect their entitlement.
Distribution Date: The date when the company officially pays out dividends.
Generally, Taiwanese listed companies distribute dividends annually, while US stocks often do so quarterly. Dividend payments usually occur after financial reports are disclosed, but specific timing varies among companies.
Note that not all profitable companies pay dividends every year. If a company needs substantial funds for business expansion or key projects, it may choose not to pay dividends even if it has earnings.
How Do Ex-Dividend and Ex-Rights Affect Stock Price?
After dividend distribution, you’ll notice a significant drop in stock price, which is normal.
The Logic of Ex-Dividend and Ex-Rights
Ex-Dividend Scenario: After paying cash dividends, the company’s total assets decrease, and the net asset value per share declines, leading to a drop in stock price.
Ex-Rights Scenario: When new shares are issued as a distribution, the total market value remains unchanged, but the share capital increases, diluting the value per share, and the stock price naturally decreases.
How to Calculate Ex-Dividend and Ex-Rights Prices
Mastering these formulas allows you to predict stock price changes before and after dividends:
Ex-Dividend Price = Closing price on record date - per-share cash dividend
Example: Record date closing price is 66 yuan, with a 10 yuan dividend per share, so next-day ex-dividend price = 66 - 10 = 56 yuan
Ex-Rights Price = Record date closing price ÷ (1 + rights issue ratio)(
Example: Record date closing price is 66 yuan, with a 1-for-10 rights issue (ratio 0.1), next-day ex-rights price = 66 ÷ 1.1 = 60 yuan
Ex-Rights and Ex-Dividend Price = ) Record date closing price - per-share cash dividend ( ÷ (1 + rights issue ratio))
Example: Record date closing price is 66 yuan, with 1 bonus share per 10 shares and a 1 yuan cash dividend (rights ratio 0.1, cash dividend 0.1 yuan), next-day ex-rights and ex-dividend price = (66 - 0.1) ÷ 1.1 = 59.9 yuan
( Meaning of Filling and Underpricing
The price drop after dividends is just a technical adjustment. If the stock price then rises back to the pre-dividend level, it’s called “filling the rights” or “filling the dividend”; if it continues to decline, it’s called “underpricing” or “under-dividend.” When filling occurs, investors’ actual gains become apparent.
Stock Dividends vs Cash Dividends: Which Is More Cost-Effective?
This is the most common question among investors, and the answer varies.
) From the Investor’s Perspective
Most investors prefer cash dividends because they have absolute autonomy once they receive cash—they can choose what to reinvest in. Also, cash dividends do not increase share capital and do not dilute your ownership percentage.
However, note that cash dividends are subject to taxation, with rates depending on the holding period; short-term holdings face higher taxes.
From the Company’s Perspective
For the company, paying cash dividends requires sufficient earnings and liquidity. Excessive dividends can squeeze the company’s development funds, limit expansion, and even trigger liquidity crises. In contrast, stock dividends do not require cash outflow, allowing the company to retain more capital for growth.
Long-term Investment Considerations
This is a key turning point: If the company’s fundamentals are strong, and stock price appreciation exceeds dividend income, stock dividends are more advantageous. Stock dividends can generate compound growth by increasing shareholding, especially suitable for long-term investors.
In other words, for long-term investors optimistic about the company’s prospects, stock dividends can bring higher returns; for investors needing cash flow, cash dividends are more practical.
How to Check a Company’s Dividend Details?
To track a company’s dividend plans, you have the following options:
Company Website
Large listed companies usually publish dividend announcements on their official websites, and many also compile historical dividend records for investors to review, helping you understand the company’s dividend consistency and stability.
Stock Exchange Website
For example, in Taiwan, the Taiwan Stock Exchange’s official website provides market announcements, including ex-rights and ex-dividend notices and calculation tables. These tables cover many years of dividend data, very comprehensive.
Other Ways of Returns Besides Dividends
Corporate shareholder returns are not limited to dividends. If a company is in a high-growth phase, stock price appreciation itself is the best return for investors. Some companies also use stock splits or buybacks to enhance shareholder value.
Stock Split: Dividing 1 share into multiple shares, increasing share capital but lowering the share price, aiming to attract more investors and boost the stock price.
Stock Buyback: The company repurchases and cancels its own shares, reducing the number of outstanding shares, increasing earnings per share, and signaling to the market that the stock is undervalued.
In summary, how to calculate dividends is the first step to understanding distributions, but to become a smart investor, you also need to consider company growth stages, personal investment goals, and tax implications to make the best choices.
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How to Calculate Dividends to Maximize Benefits? Understand the Truth About Stock Dividends and Cash Dividends Once and for All
As a shareholder, your primary concern is how to earn returns from your investments. Listed companies typically distribute a portion of their profits to shareholders after profit realization, which we commonly refer to as dividends or distributions. But did you know? How to calculate dividends directly affects how much money you receive. Today, we will take you deep into understanding the logic behind stock dividends and cash dividends.
Two Ways of Dividends: Stock or Cash?
When a listed company decides to return profits to investors, there are mainly two options.
First: Distribute Stocks (also called Bonus Shares)
The company issues free shares into your account, increasing your total shareholding, known as “stock dividends.” This method has a lower threshold; the company does not need large cash outflows, and can implement it even if cash on hand is insufficient.
Second: Distribute Cash (also called Dividend Payment)
The company directly deposits cash into your account, known as “cash dividends.” This method requires strict conditions; the company must have sufficient earnings and cash flow, and it must not affect normal operations.
Which method to choose depends on the company’s current situation and development stage.
How to Calculate Dividends? Practical Case Step-by-Step
Once you understand the dividend distribution methods, let’s look at how to calculate dividends in detail.
Stock Dividend Calculation
Suppose you hold 1,000 shares of a listed company, which decides to distribute stock dividends at a ratio of 1 share for every 10 shares held.
Calculation: (1000 shares ÷ 10) × 1 = 100 shares
After distribution, your total shares become: 1000 + 100 = 1100 shares
Cash Dividend Calculation
Holding 1000 shares, the company decides to pay 5 yuan per share.
Calculation: 1000 shares × 5 yuan = 5000 yuan
Tax Adjustment: If 5% personal income tax is deducted, the actual amount received is 5000 × 0.95 = 4750 yuan
Hybrid Distribution
Some companies use both methods simultaneously. For example, with 1000 shares, distributing 1 bonus share per 10 shares and paying 1.5 yuan cash, you end up with: 100 shares of stock + 1500 yuan cash
Complete Process and Timing of Dividend Distribution
To receive dividends on time, you need to understand the significance of key dates.
Announcement Date: The company announces its dividend distribution plan.
Record Date: The most critical day. Shareholders holding the stock on or before this date are eligible to participate in the dividend distribution.
Ex-Dividend and Ex-Rights Date: Usually the trading day after the record date. Investors buying shares on or after this date cannot enjoy the current dividend, but existing shareholders selling on this date do not affect their entitlement.
Distribution Date: The date when the company officially pays out dividends.
Generally, Taiwanese listed companies distribute dividends annually, while US stocks often do so quarterly. Dividend payments usually occur after financial reports are disclosed, but specific timing varies among companies.
Note that not all profitable companies pay dividends every year. If a company needs substantial funds for business expansion or key projects, it may choose not to pay dividends even if it has earnings.
How Do Ex-Dividend and Ex-Rights Affect Stock Price?
After dividend distribution, you’ll notice a significant drop in stock price, which is normal.
The Logic of Ex-Dividend and Ex-Rights
Ex-Dividend Scenario: After paying cash dividends, the company’s total assets decrease, and the net asset value per share declines, leading to a drop in stock price.
Ex-Rights Scenario: When new shares are issued as a distribution, the total market value remains unchanged, but the share capital increases, diluting the value per share, and the stock price naturally decreases.
How to Calculate Ex-Dividend and Ex-Rights Prices
Mastering these formulas allows you to predict stock price changes before and after dividends:
Ex-Dividend Price = Closing price on record date - per-share cash dividend
Example: Record date closing price is 66 yuan, with a 10 yuan dividend per share, so next-day ex-dividend price = 66 - 10 = 56 yuan
Ex-Rights Price = Record date closing price ÷ (1 + rights issue ratio)(
Example: Record date closing price is 66 yuan, with a 1-for-10 rights issue (ratio 0.1), next-day ex-rights price = 66 ÷ 1.1 = 60 yuan
Ex-Rights and Ex-Dividend Price = ) Record date closing price - per-share cash dividend ( ÷ (1 + rights issue ratio))
Example: Record date closing price is 66 yuan, with 1 bonus share per 10 shares and a 1 yuan cash dividend (rights ratio 0.1, cash dividend 0.1 yuan), next-day ex-rights and ex-dividend price = (66 - 0.1) ÷ 1.1 = 59.9 yuan
( Meaning of Filling and Underpricing
The price drop after dividends is just a technical adjustment. If the stock price then rises back to the pre-dividend level, it’s called “filling the rights” or “filling the dividend”; if it continues to decline, it’s called “underpricing” or “under-dividend.” When filling occurs, investors’ actual gains become apparent.
Stock Dividends vs Cash Dividends: Which Is More Cost-Effective?
This is the most common question among investors, and the answer varies.
) From the Investor’s Perspective
Most investors prefer cash dividends because they have absolute autonomy once they receive cash—they can choose what to reinvest in. Also, cash dividends do not increase share capital and do not dilute your ownership percentage.
However, note that cash dividends are subject to taxation, with rates depending on the holding period; short-term holdings face higher taxes.
From the Company’s Perspective
For the company, paying cash dividends requires sufficient earnings and liquidity. Excessive dividends can squeeze the company’s development funds, limit expansion, and even trigger liquidity crises. In contrast, stock dividends do not require cash outflow, allowing the company to retain more capital for growth.
Long-term Investment Considerations
This is a key turning point: If the company’s fundamentals are strong, and stock price appreciation exceeds dividend income, stock dividends are more advantageous. Stock dividends can generate compound growth by increasing shareholding, especially suitable for long-term investors.
In other words, for long-term investors optimistic about the company’s prospects, stock dividends can bring higher returns; for investors needing cash flow, cash dividends are more practical.
How to Check a Company’s Dividend Details?
To track a company’s dividend plans, you have the following options:
Company Website
Large listed companies usually publish dividend announcements on their official websites, and many also compile historical dividend records for investors to review, helping you understand the company’s dividend consistency and stability.
Stock Exchange Website
For example, in Taiwan, the Taiwan Stock Exchange’s official website provides market announcements, including ex-rights and ex-dividend notices and calculation tables. These tables cover many years of dividend data, very comprehensive.
Other Ways of Returns Besides Dividends
Corporate shareholder returns are not limited to dividends. If a company is in a high-growth phase, stock price appreciation itself is the best return for investors. Some companies also use stock splits or buybacks to enhance shareholder value.
Stock Split: Dividing 1 share into multiple shares, increasing share capital but lowering the share price, aiming to attract more investors and boost the stock price.
Stock Buyback: The company repurchases and cancels its own shares, reducing the number of outstanding shares, increasing earnings per share, and signaling to the market that the stock is undervalued.
In summary, how to calculate dividends is the first step to understanding distributions, but to become a smart investor, you also need to consider company growth stages, personal investment goals, and tax implications to make the best choices.