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What Is a Dividend?

Written by Louis Even on Sunday, 16 October 2016. Posted in In This Age of Plenty (book)

In this age of plenty - Chapter 12

When a company makes a surplus from its operations, after having deducted the necessary amounts to meet its obligations, and after having set aside the required funds for depreciation and the redeeming of its debts, it distributes the rest among its shareholders. If, for example, the company's share-capital is $500,000, and the distributed clear profits are $30,000, the company will declare a 6% dividend, because $30,000 represents six-hundredths of $500,000. The man who has ten $100 shares in this company, will get a dividend of ten times $6, that is, $60; the one who has twenty shares, will get a dividend of $120.

If the clear profits are only $10,000, the dividend will be only 2 percent. And if there remains no clear profits after all necessary payments, there will then be no dividend.

The dividend therefore presupposes the existence of surpluses.

The granting of dividends to the shareholders does not cause them to lose interest in their company. Quite the contrary, if these shareholders are also employed by the company, if, by their work, they contribute to the production of manufactured articles in the company's plants, will they become lazy, become lax because they draw dividends over and above their wages or salaries? It would be ridiculous to think so. They know that only an increase in the volume or in the quality of production will bring more dividends. No doubt they will double their effort.

Who is entitled to a dividend? They are shareholders who have invested funds in the firm. If the firm is a cooperative, the producers themselves after having drawn their wages or salaries, are also entitled to their dividend, to their share of the surpluses, if there are any, because they are at the same time both the producers and shareholders.

And once again, where do the dividends come from? They come from surpluses; their size is determined by the amount of surpluses. The dividends are not money taken from some shareholders to be given to others. The dividends do not create debts for the company, since the company only distributes dividends according to its surpluses.

These basic notions are not new to anyone, but to recall them may be helpful when we deal with the “national dividend” or the Social Credit dividend. Critics who perhaps have not even looked into the subject, are often heard saying: “These dividends, they are like welfare... They will make people lazy... No one will want to work anymore, etc.”

Of course, when speaking thus, these critics make mental exceptions for themselves. They never believed for one moment that if they, themselves, were to draw a dividend of some seven-hundred or eight-hundred dollars a month, they would lie down on long chairs, thanking the Lord for having given them their daily bread. No, not they, because they have strong moral principles, a highly developed intelligence, and will always be eager to work to improve their standard of living... But it is the others they worry about, the “mob”, the commoners of little virtue or intellect on whom they do not deign cast a glance, or much less educate. For these puritans, the “mob” exists to water the earth with their sweat and tears... and to live in perpetual deprivation.

Yet, today, each person is entitled to the heritage handed down by past generations. When a person dies and leaves his possessions to his heirs, do we ask whether the heirs are just or whether they are sinners? Is their inheritance denied, under the pretext that they will not know how to make good use of it?

At this point, a few observations have to me made concerning the notion of this common inheritance to which all human beings must be the beneficiaries.



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