Equalizing Dividend

  

Categories: Stocks

Whatever.com paid its dividends on Mar 31, Jun 30, Sep 30, and Dec 31. It bought Shmegeggie.com, which paid its dividends on Feb 28, May 31, Aug 31, and Nov 30. To "true up" the dividend structure for both companies, Whatever.com issues an equalizing dividend to the shareholders of Shmegeggie, to make up for the time lapse and difference in the amount of dividend previously paid.

That is, it pays a one-time 22-cent equalizing dividend to now make everyone whole and happy. Going forward, the dividend for the combined company is like a buck a share...for all shareholders.

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Finance a la shmoop what is a dividend? well let's start with how [Bird flying with a bag]

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dividends came to be well dividends are the result of a great and awesome quote

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problem unquote.. what happened to corporations is they grew and became

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dominant in their respective industries they retained so much cash profit even [man as a giant corporation crushing city buildings]

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after building factories digging mines and smelting whatever they smelted well

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that they couldn't figure out what to do with the cash so under a lot of [man with an open briefcase full of cash]

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fire the Board of Directors, the fat and cash happy corporations just to begin to [common shareholders hitting the board of directors]

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give it back to shareholders their owners who were in turn made happy by

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that event and in many cases on the announcement of an increased dividend [share prices increasing and man shouts into a speaker]

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policy share prices went up because of that whole investor happiness thing

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there's a good structural reason for dividends to exist however they force [men bricklaying]

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companies to be disciplined in their spending that is if companies aren't

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disciplined, they don't have the money to pay the dividend and well when that

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happens to a company basically everyone gets fired in most public companies [Donald Trump firing an employee]

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dividends are viewed as a long-term commitment not as like a one-time thing

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in fact during the Great Depression AT&T famously continued paying its dividend

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without fail and many families relied on that dividend to make ends meet in the [family together eating dinner]

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modern era companies in financial stress have even borrowed money just to make

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sure they can pay their dividends to investors why well they believe that

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when they get through the tough times they'll return to that massive [man running down a road sign posted under tough times]

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profitability and they'll have a track record of continuing to pay dividends [oil machine working as cash piles up]

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and that love is worth taking out a loan to pay a dividend the other big thing to

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consider is that dividends are a very meaningful part of investment returns [dividends arrow pointing to investment returns]

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which lousy financial journalists so often seem to forget many will decry the

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era of the 70s as a lost decade looks like the stock market went nowhere from [man fumbling through a skip]

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1968 to about 1980 right? well no it didn't go up but during that

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period company's continued to pay their dividends and for the decade the [money going into a shareholders window]

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you've done nothing other than collect your six percent a year in dividends [Man collecting a 6% dividends]

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well you would have been just fine you would have almost doubled your

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investment money this way ignoring taxes from about nineteen sixty eight to [Man doubling his investment money from 1968-1980]

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