Distribution of profits to a company's shareholders
The amount of the dividend is determined every year at the company's annual general meeting, and declared as either a cash amount or a percentage of the company's profit. Once the dividend has been declared, the share price is reduced by the amount of the dividend, and the share is then said to be "ex-dividend".
The dividend is the same for all shares of a given class (e.g. preferred shares).
The dividend is calculated mainly on the basis of the company's unappropriated profit and its business prospects for the coming year. It is then proposed by the Executive Board and the Supervisory Board to the annual general meeting. At most companies, however, the amount of the dividend remains constant. This helps to reassure investors, especially during phases when earnings are low, and sends the message that the company is optimistic with respect to its future performance.
Because of the half-income procedure, dividend payments are only subject to half the shareholder's personal income tax. The dividend is paid out by the banks acting on behalf of the company.
