Dividends: understand what your payments are and how they work

When it comes to investments, doubts soon arise about dividends, one of the forms of profit sharing among shareholders of companies that are publicly traded on the stock exchange.

For a lot, in addition to a capital market rule, this remuneration can be part of the investment strategy, with the possibility of being included in the retirement project. But how does the payment of dividends work? How do I know how much I will receive? How to build a portfolio?

Clear these and other questions:

What are dividends?

Dividends are part of the net income of companies listed on the stock exchange that, by law, must be distributed among shareholders. All investors who own at least one share of the company in question, up to the date established in a notice to the market, receive this remuneration.

The payment of dividends is provided for in article 202 of Law 6,404/76, also known as the Corporations Law, which leaves it to the company itself to define the percentage, date and how they will be paid to the partners. The details of this sharing are indicated in the bylaws or at the Annual General Meeting.

Although there is no minimum amount established by law, companies usually share 25% of profits for those who have this right. Thus, in addition to the variation in the price of the paper, the investor is also compensated for the company’s financial performance, if it is positive.

“Many people buy a share thinking only about the valuation of that role, when, in fact, there are other types of remuneration. Dividends, interest on equity and bonus are some of the benefits of a share”, says Cristiano Corrêa, finance professor at the Brazilian Institute of Capital Markets (Ibmec).

How does the payment of dividends work?

When defining the payment date, companies also determine how investors will be remunerated, according to the options available in the market: in cash, in shares or in subscription of new shares.

• In cash: the profit proportional to the total number of shares is deposited in the partner’s account at the brokerage house. Example: each investor receives R$1 per share.
• In shares: the shareholder receives new shares from the same company, which are added to the ones he already owns. Example: each investor receives 1 share for every 10 shares he has.
• In subscription of new shares: the company makes a new issue of shares and allows the partner to purchase some shares for free or at a discount. Example: the investor receives a 50% discount to buy a new share of the company.

How do I know how much and when I will receive dividends?

The payment date and the percentage to which each share will be entitled are defined at the Annual General Meeting, which brings together voting shareholders. Subsequently, the company releases a notification of what was decided at the meeting.

In this press release, also called a material fact, companies inform the date and how much of the “dividend yield” each share will pay.

In the same document, the companies inform the deadline, called “data-com”, which will entitle the investor to receive dividends. For example, only those who have shares on August 31 will receive compensation. Therefore, trades made from September 1st, called ex-date, will be excluded from the payment of this exercise.

Which companies pay the most dividends?

According to a report by the Economatica platform, made exclusively for the CNN Brasil Business, mining company Vale was the company that paid the most dividends in 2021. Since the beginning of the year, the company has already divided 23.4% of its profits among its shareholders.

Afterwards, Copel and Taesa complete the podium. Electricity companies shared 22.8% and 15.6%, respectively, of their net earnings with investors. Following the list appears Petrobras, with 12% of distributed profit and Vibra, with 11.4%.

How to build a dividend portfolio?

The investment portfolio diversification rule is also useful for those who want to receive dividends, as directed by Corrêa. According to him, companies from different sectors should be chosen, but with a good payer history. In addition, areas linked to infrastructure, such as mining and electricity, tend to have a higher recurrence of payments, as companies are more consolidated.

“Companies that are in the growth phase tend to pay less dividends to shareholders, as they use this money to grow. On the other hand, energy companies that have already reached maturity and have a predictable number of customers, are at the stage where they manage to better remunerate their shareholders”, he highlights.

The specialist, however, remembers that there are risks in betting on dividends, as they are linked to shares, which suffer variations. “The portfolio has to be a part of the equity, as it is not recommended to put all the capital in variable income, because of the risk [de variação] and also because dividends may not be paid. It is necessary to balance the portfolio with fixed income products, such as Treasury bonds and CDBs, for example”, he advises.

Are dividends tax deductible?

One of the great advantages of dividends is the exemption from Income Tax, provided for in the legislation. When profits are received through this modality, there is no 15% withholding tax, as occurs in remuneration via JCP (Interest on Equity).

What is the difference between dividends and interest on equity

Like dividends, interest on equity is also part of a company’s net income. It is normally distributed to investors when capital builds up. The main difference between the two types of remuneration lies in the taxation of Income Tax, which, in the case of interest on equity, is 15% direct at source.

Mutual funds and ETFs pay dividends?

There is no legal provision for the payment of dividends directly to shareholders of investment funds and index funds, also called ETFs. Despite this, fund managers often receive these amounts and use them to rebalance positions in strategic papers. This, in a way, has a positive effect on the fund’s results, increasing the value of each investor’s shares.

How to monitor the payment of dividends?

Some virtual platforms offer the complete schedule of dividends that will be paid by companies during the year. These dates are updated daily, based on communications issued by companies listed on the stock exchange.

In general, the websites provide the company name, data-ex and data-com, in addition to the amounts that will be distributed. In some cases, they also provide the information released to each ticker.