Delta Corporation Earned $2.50 Per Share During Fiscal Year 2008 And Paid Cash Dividends Of $1.00 Per Share. During The Fiscal Year That Just Ended On December 31, 2009, Delta Earned $3.00 Per Share, And The Firm's Managers Expect To Earn This Amount?


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Charlotte St. Aubyn Profile
In 2008, Dividend paid = $1 per share and EPS = $2.50. Therefore the dividend pay out ratio = $1 / $2.50 = 0.4 or 40%.

The word "dividend" comes from the Latin word "dividendum" meaning "thing to be divided". Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

When a corporation earns a profit or surplus, that money can be put to two uses: It can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

For a joint stock company, a dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of after tax profits among shareholders. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholder equity section in the company's balance sheet - the same as its issued share capital. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from the fixed schedule dividends.

Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense. Dividends are usually paid in the form of cash, store credits (common among retail consumers' cooperatives) and shares in the company (either newly created shares or existing shares bought in the market.) Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.

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