The main forms of dividend payment
October, 18 2021

There are two main forms of payment: 1. Payment of dividends in cash. 2. Payment of dividends in property - securities. The positive thing about the payment of dividends in shares is that the profit remains with the company, the shareholders receive an additional block of shares. On the other hand, an increase in the number of shares leads to a decrease in their market value (in theory) and to a further decrease in their profitability. Although it is believed that the payment of dividends in shares in a small amount (up to 20%) practically does not affect the share price. The payment of dividends in shares of an enterprise is addressed in cases of a shortage of cash, the need to reinvest profits for the development of the company, a desire to change the capital structure (increase the share of equity capital), and an attempt to attract effective managers with shares. Specialists in the field of securities recommend using the buyback of own shares as a tool for regulating the price of shares (according to various studies, immediately after the announcement of the buyback of shares, quotations grow by an average of 2%). In addition, the implemented programs of buyback by the company of its own shares can ensure stable growth of the rate over a long period. It should be noted that regular cash dividends provide constant confirmation of the company's ability to generate cash flow, profit, which increases investment attractiveness. Share buybacks are usually not regular and, rather, can be used as an additional "information signal", which is useful in cases where management believes that the share price is undervalued.

Alexander Mishchenko
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