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What are Dividends Payable?

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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 September 2016
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Dividends payable is the amount owed to shareholders after a dividend has been declared. This account is funded after the company analyzes its quarter and looks at how much profit there is. Then, that profit can be put into a special account, which is then distributed to shareholders of record on a certain date.

The dividends payable is often referred to as a liability, and while it is an obligation, many may not consider it a liability. In the truest since, liabilities are debts owed by the company to another party or parties. In this case, even though the payments are to the company's owners, they are considered liabilities because the corporation has its own, separate identity. In essence, what is truly taking place is that the company's shareholders are paying themselves money, based on a decision of the executive team and board of directors.

Many investors look at the dividends payable to keep track of a company's finances. They are found in the liability section of the ledger sheet. These are more than liabilities. Even though they represent expenses, they are a special kind of expense that can actually point to how profitable the company has been in the past and what kinds of returns investors may be able to expect in the future.

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Many things can affect the dividends payable balance. As a company's profit fluctuates each quarter, so will its dividends payable account. Naturally, lower profit will lead to lower dividends, unless expenses are substantially cut or assets are sold. Further, a company may acquire a competitor or other type of company, thus reducing the dividends payable that may otherwise be paid in a quarter. Therefore, investors must look at other factors when considering whether a company is in good financial standing.

Generally, companies give a full accounting for their finances at the quarterly meetings. The most comprehensive analysis happens at the annual meetings. This is when company's will review all four quarters, track changes through the season and do a historical comparison. This is also when the final dividends payable numbers of the year will be released.

For the purposes of bookkeeping, publicly-traded corporations often declare dividends payable in the form of US Dollars. This may be true both for companies based in the United States and those based in other parts of the world. Using the US Dollar standardizes the currency by which these dividends compared to other companies.

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John57
Post 4

If you are invested in a stock or mutual fund that pays dividends, there are several ways you can find out what that dividend is.

I know some people who buy particular stocks just because of the dividends they receive on that stock. Some companies have a history of paying nice dividends that can add up to a significant amount of money if you have enough shares.

You can find the dividends payable on the balance sheet of the company. Many online investment sites will also have this information included on the research section of that particular company. It is also included on the annual report that a company files.

When I worked at an investment company

, I had some customers who had a check coming in every month from dividends they received on their stocks.

Since the dividends are paid out quarterly, they had them staggered so they were set up to receive at least one check every month as extra income for themselves.

andee
Post 3

With my mutual fund investments, I don't ever even see the dividends paid out. I have them automatically reinvested back in to the fund. I see this as a little bonus that will continue to grow over time just like the mutual fund does.

Every year I get a statement from the fund company showing what the dividend payable date was and how much money was reinvested.

This is especially important around tax time as the dividends received are counted as income and must be reported that way.

Bertie68
Post 2

@sweetPeas - I kind of have the opposite view. I think nowadays,a lot of companies don't pay dividends, and if they do they are pretty low - hardly worth the time.

I usually just look at quarterly and annual reports of companies, watch their history, and invest in stocks that have good historical records. I like to make a fairly quick profit and get out. It can be risky, but I'm doing pretty well.

If a stable and more traditional company is doing well, I might buy it. But not because they give a dividend. It usually doesn't amount to much.

sweetPeas
Post 1

Stock dividends are a nice reward to get each quarter for investing your money. I have found that the kind of company that pays the best dividends are those older stable companies that don't need to put so much money into research and development of new products.

With some of their excess money, they give back profits to the stock owners. If you hold the stock for many years, you can make quite a bit of money. Some of my dividend paying stocks have gone up steadily.

So, in the end, I have my dividends, which I put back into the stock, and I hope I can sell the stock at a pretty good profit one day.

In the past few years of market instability, it's a pretty good way to go.

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