Dividends are never assured until they are paid. Until a company shows you the money, all their dividends are estimates.
Sure there are companies that have paid the same dividend amount every month, quarter, half-year, or year, for years (dividend kings; achievers; aristocrats). There are also those that have paid steadily increasing dividends every year for years (dividend challengers; contenders; champions). Yet nothing counts until the cash is in hand.
That is because presumed financial guarantees and precedents are easily over-ruled. A cranky board of directors or any sudden shift in company policy or fortunes can cancel or vary the payout of dividends to shareholders.
Furthermore, there are many business entities, corporations, funds, trusts, partnerships, and polyglot groups that pay shareholders as the spirit, or some arbitrary but well-crafted financial formula, dictates. In those cases calculated periodic averages are used to generate a “reliable” dividend estimate.
Take the case of CALM. Cal-Maine Foods, Inc. Not based in California or Maine, CALM is in Louisiana. It deals in eggs and egg by-products. It calculates its quarterly dividend payouts thus: “Pursuant to Cal-Maine Foods’ variable dividend policy. in each quarter for which the company reports net income, the company pays a cash dividend to shareholders in an amount equal to one-third of such quarterly income. No dividends are paid in a quarter for which the Company does not report net income.”
No income was reported by Cal-Maine Foods, Inc. in the fourth quarter of 2016, and no dividend was paid. However, in the first quarter of 2016 the company paid a quarterly dividend if $0.933 per share. In the second quarter the dividend was $0.751 and $0.441 in the third. Thus the 2016 annual dividend per share from CALM was $2.125. Based on a recent share price of $50.00 their yield was 4.25%.
The projected annal dividend for CALM in 2016 at a $50 share price varied from 7.46% to 6% to 3.5% to 0% using the common method multiplying the most recent quarter’s dividend by 4 and dividing by the most recent share price.
Therefore, a dividend payout averaging system has to be used to make an educated guess about future dividends from such variable paying corporations, funds, trusts, or partnerships.
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