Dividend paid for new share

When a company pays a dividend on newly issued shares, it's a bit more complex than a regular dividend payment. Here's what happens:

Newly issued shares: When a company issues new shares, it's called an "initial public offering" (IPO) or a "secondary offering" (SEO). These new shares are typically sold to investors, and the company receives the proceeds from the sale.

Dividend payment: When the company pays a dividend on these newly issued shares, it's called a "dividend payment on newly issued shares" or "dividend payment on new stock". This means that the company is distributing a portion of its profits to the new shareholders, just like it would with its existing shareholders.

Key differences:

  1. No prior ownership: The new shareholders didn't own the shares before the dividend payment, so they didn't receive any dividends previously.
  2. Pro-rata distribution: The dividend payment is typically made on a pro-rata basis, meaning that each new shareholder receives a portion of the dividend based on the number of shares they own.
  3. No dividend yield: Since the new shareholders didn't own the shares before the dividend payment, they don't have a dividend yield to calculate.

Example:

Let's say XYZ Inc. issues 1 million new shares at $50 each, raising $50 million in capital. The company then decides to pay a dividend of $0.50 per share to its new and existing shareholders.

In this example, the new shareholders didn't own the shares before the dividend payment, so they don't have a dividend yield to calculate. However, they still receive a portion of the dividend payment based on the number of shares they own.

I hope this helps clarify things!