When Petrobras (PETR4 and PETR3) announced at the end of July that it would pay R$87.8 billion in dividends, of which R$6.73 per share, there was a rush on the company’s assets, which rose by 7% on the same day. Today, the company that pays the most profits in the world.
But how are profits distributed? They differ, for example, from the share of profits and results that an employee of the company receives. It is not just a bonus that the shareholder earns.
To understand how dividends are distributed and paid, we consulted two experts on the topic: Orleans Martins, president of TC LABs, at consultancy TC Economatica, and Daniel Alves, economist at Nid Consultoria. Clear your doubts.
What are stock dividends? When a publicly traded company makes a profit, it can distribute a portion of that gain to its shareholders: these are dividends. Alves says the average Brazilian pays out 25% of net profits.
Why do companies decide to share profits? The company earns by distributing profits in at least two ways: by attracting more shareholders and by simplifying its management.
“With less cash on hand, managers need to make more thoughtful decisions,” explains Martins, who parallels the family budget: If there’s money left in the house, the family spends more. But if money is short, she thinks better when doing the math so as not to throw money away.
Who can receive? Who owns the shares of the company. In general, the company sets a deadline for the acquisition – called the “date with”. In the case of Petrobras, the shareholder who owned the oil company’s assets until August 11 received dividends from the state-owned company. This payment can be made in single installments or in more installments.
How much does a shareholder get paid? He receives a value per share – the more shares a shareholder owns, the more he will receive.
But there is a point of interest: the dividend is deducted from the value of the company’s stock. If the company has shares worth, say, R$10, and announces that it will pay R$1 of dividend per share until the deadline, hypothetically 15 days from now, after that period the dividend is deducted from the share price.
If within 15 days they estimate the value to R$10.80, it would be R$9.80 (share value minus earnings). If the amount drops to $8, it will be worth R$7.
So the investor loses? no. Whether or not the stock goes up in value, the investor will, in the end, keep the stake he already owned, plus the cash profits deposited into his broker’s account without tax deduction.
In the case of Petrobras, the state-owned company announced a dividend payment on July 28 after the market closed. His deadline was August 11. On the 28th, PETR4 closed the trading session at R$32.29.
From that day to date, the stake is up 12% and costs R$36.25. On August 12, the dividend (6.73 R$) was deducted from the previous day’s quote, making the stock R$29.52 at the start of the trading session. But soon the stock regained part of its value, and on the same day, the stock closed at R$31.71.
Why does the stock lose its value? Because the company’s cash flow is down. “The stocks, simply put, are backed by company money,” Alves says. If the company, again using the Petrobras example, pays a dividend of R$87.8 billion, that amount will be deducted from its funds. Therefore, the value of the dividend is subtracted from each share.
So, what is the benefit of receiving dividends? Adding to one side and excluding the other, it seems that the shareholder gains nothing, right? But there is an advantage. The corresponding amount of dividends falls to the shareholder’s account. It is as if he sold part of his investment and received the money, but he still owns all the shares he has in his portfolio. And unlike in the sale of the stock, he does not pay taxes on the amount acquired.
“It’s a change in the ‘status’ of your investment. Part of it is no longer something risky, like an action, and materializes in cash, without income tax deduction,” Martins says.
Let’s take another example: You have 1,000 shares in a company with a total value of R$10,000 ($10 per share). Today, this company is announcing a dividend of R$1 per share within two weeks. You will receive 1,000 BRL cash in your account and you will continue to have the same 1000 shares, only less than 1 BRL per share. At the end of the day, you will have 1000 R$ in your pocket and the same 1000 shares worth R$ 9,000, which you can continue to earn.
“I like to compare it to a chicken,” Martins says. chicken stock. In the morning the chicken weighs 1 kg. In the afternoon she lays 3 eggs and weighs them again: the hen now weighs 900 grams. You still have the chicken, but now you have three eggs, too.
The real advantage lies in eliminating the risks — which are inherent in stocks — and in not paying taxes, Martins explains.
Find out what happened to an investor who had shares in reinsurance company IRB Brasil (IRBR3) prior to 2020, for example. The shares, which at the end of 2019 were worth about R$100, are now down to R$2, due to signs of mismanagement. “Anyone who took profits out of the company when it was making a profit got back part of the investment and didn’t incur all of that loss,” Martins says.
How is payment made? Some companies pay dividends all at once, others divide it into a few installments. The funds are deposited into your account with the brokerage firm where you trade your shares. To use these funds, you need to enter the platform of your bank or broker and give the order to transfer to your checking account.
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