What are common dividends?

Dividend is any distribution to shareholders in a company that pays this company from net income or undivided earnings, which is earnings held in the company's reserve or for repayment of debt. Some companies decide to pay a dividend of shares where the shareholder receives more shares in the company than in cash, but most pay cash dividends. There are two primary types of cash dividends: common dividends and qualified dividends. The difference between a normal dividend and a qualified dividend is the way in which it is treated for federal income tax purposes. Common dividends are considered to be a common income and are taxed at a normal taxpayer's tax rate and a qualified dividend is taxed lower, preferred tax rate.

shareholders provide capital to the companies. If the company's profits exceed its operational, reserve and expansion needs, most companies decide to pay dividend to shareholders. The company with the largestThe probability will pay dividend, whether it is an ordinary dividend or a qualified dividend are generally larger and more established companies. Smaller, less established companies, known as "growth" companies, generally reinvest earnings in the company's main operations to increase the company and its market share rather than pay dividends.

Dividend paying companies usually pay these dividends quarterly, although some dividends apply annually. At the end of the calendar year, a company that pays dividends to its shareholders must usually provide each shareholder a form that shows the overall dividend paid. Unless otherwise stated, all dividends are considered to be common dividends for income tax purposes.

There are several criteria that must be met to be considered a qualified dividend and thus to obtain preferential taxof outlence. First, the dividend must be paid by the qualifying company. Finally, dividend cannot be mentioned as a forbidden qualified dividend by a government agency that controls taxes such as the internal income service in the United States.

skilled dividends are reported as part of the reported conventional dividends. It is up to the shareholder to determine what, if at all, part of the ordinary dividends of the paid compliance meets the criteria to be considered qualified dividends. In case of doubt, the surest investor is to find out whether the dividend is a common dividend or a qualified dividend, it is to check with the investors' relationships representative.