The distribution of the earnings of the invested enterprises has always been the focus of investors' attention. It is important for investors to understand how corporate earnings are distributed and what policies are distributed. This article will give you a detailed introduction to the distribution methods and policies of the income of the invested companies to help you make informed investment decisions.
1. Proportional distribution of shares
The distribution of earnings from the invested company depends first of all on the proportion of shares held by the investor. Generally speaking, corporate earnings are distributed according to the proportion of each shareholder's shareholding. For example, if an investor holds 10% of the company's shares, he will receive 0% of the company's total returns.
2. Dividend Policy
Dividend policy is an important means for companies to distribute earnings. Usually, companies will formulate dividend policies based on profitability and development strategies. Dividend policies are usually divided into two types: cash dividends and stock dividends. Cash dividends refer to the distribution of part of the earnings to shareholders in the form of cash; Stock dividends are dividends that distribute the proceeds to shareholders in the form of new shares.
| Dividend type | Cash dividends | Stock dividends |
|---|---|---|
| definition | The company distributes a portion of the proceeds to shareholders in cash. | The company distributes the proceeds to shareholders in the form of new shares. |
| Pros and cons: | Cash dividends provide direct cash gains to shareholders, but may be subject to income tax. | Stock dividends can increase a shareholder's shareholding, but may dilute the control of the original shareholder. |
3. Distribution of proceeds from preferred stock and common stock
There are two types of shares issued by a company: preferred shares and common shares. Preferred shareholders have a preferential right in the distribution of earnings, that is, preferred shareholders will receive dividends before ordinary shareholders when distributing earnings in the enterprise. However, preferred shareholders usually do not have the right to participate in the decision-making of the business.
| Type of shares | Preferential shares | ordinary shares |
|---|---|---|
| Distribution of proceeds | Preferred shareholders have priority in the distribution of earnings. | Common shareholders distribute earnings after preferred shareholders. |
| Decision-making participation | Preferred shareholders generally do not have the right to participate in corporate decision-making. | Common shareholders have the right to participate in corporate decision-making. |
4. Impact of Laws and Regulations
The distribution of profits from shareholding enterprises is also subject to laws and regulations. The laws and regulations of various countries have different provisions on the distribution of corporate income, and investors need to understand the laws and regulations of the country or region where they are located to ensure the compliance of income distribution.
5. Internal Policies
A company's internal policies can also affect the distribution of earnings. Some companies set up employee stock ownership plans to distribute a portion of the proceeds to employees to motivate them to be motivated and loyal. In addition, enterprises may also use part of the proceeds to expand reproduction, R&D investment, etc., to achieve sustainable development of enterprises.
In short, the distribution method and policy of the income of the shareholding enterprises are affected by a variety of factors. Investors should make reasonable investment decisions based on understanding these factors and taking into account their own investment objectives and risk tolerance.