The biggest benefit of investing in the stock market is the chance to receive dividends payment. They are the amount of money from portions of company earnings given to its shareholders. It can be investors’ great source of passive income.
Even, there are times when companies pay special dividends. These are the dividends given to shareholders unannounced. Companies give this special payment when there is extra cash o their hand.
The Difference between Special and Regular Dividend
Regular dividends are commonly predictable. Companies pay it quarterly. For instance, Coca-Cola this day gives 40% per share to its investor quarterly. That is a pretty solid return since it is a 3.4% dividend yield.
The percentage of it from every company can vary. Yet, there will not be a drastic change in that percentage in each period.
On the other hand, special dividends are different from regular dividends. Companies only pay it whenever they get a lot of cash on their hands.
It is also usually a one-time payment and there is a possibility that it will not get repeated. So, investors should never consider this when they are researching on companies stock to invest in.
However, special dividends can bring problems during tax time. Normally, dividends stock is a taxable account. The tax rate for its payment usually varies from 10% to 37%, depends on the investor’s total income.
Since investors usually get this type of dividend payment in surprise, then, they can get caught in unexpected tax obligations.
The Opposition of Special Dividends
Many people think that the issuance of a special dividend is not the right move. These people think that with the huge amount of cash on the company’s hand, they should use it to enlarge their business, through acquisition or products and services development.
Some other people also think that the companies’ workers own bigger right on that money. They are the ones who should get bonuses or bigger wages.
