FAQs
South Africa's Companies Act governs the payment of dividends by companies. The Companies Act sets out certain requirements and restrictions regarding dividend payments, including solvency and capital maintenance tests.
Who argues that the choice of dividend policy almost always affect the value of the firm? ›
Walterargues that the choice of dividend policies almost always affects the value of the enterprise. His model shows clearly the importance of the relationship between the firm's internal rate of return (r) and its cost of capital (k) in determining the dividend policy that will maximise the wealth of shareholders.
What are the rights of shareholders in a private company in South Africa? ›
Shareholders in South African companies have the fundamental right to participate in annual general meetings (AGMs) and exercise their voting rights. At these meetings, they cast votes on various matters, including the appointment of directors, approval of financial statements and the declaration of dividends.
What is one reason that may explain why dividend policy is relevant to investors? ›
The dividends and dividend policy of a company are important factors that many investors consider when deciding what stocks to invest in. Dividends can help investors earn a high return on their investment, and a company's dividend payment policy is a reflection of its financial performance.
Which company pays highest dividend in South Africa? ›
South African companies with the highest dividend yields
Symbol | Div yield % (indicated) | Market cap |
---|
MRF | 33.60% | 3.124 B ZAR |
TMT | 15.24% | 462.347 M ZAR |
TGA | 15.15% | 18.552 B ZAR |
CMH | 13.12% | 2.087 B ZAR |
32 more rows
How much tax do you pay on dividends in South Africa? ›
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals. For more information see Dividends Tax.
Who formally decides when a firm pays a dividend? ›
Therefore, cash dividends reduce both the Retained Earnings and Cash account balances. There are three prerequisites to paying a cash dividend: a decision by the board of directors, sufficient cash, and sufficient retained earnings. Four dates are associated with a cash dividend.
Which shareholder is more likely to receive regular dividend income? ›
Preferred shareholders have priority over a company's income, meaning they are paid dividends before common shareholders. Common stockholders are last in line when it comes to company assets, which means they will be paid out after creditors, bondholders, and preferred shareholders.
What is the major factor affecting the dividend policy of a firm? ›
There are various factors affecting the dividend decisions of firms carefully assessed. Profitability, cash flow, financial health, growth options, industry norms, legal and regulatory needs, and shareholder preferences all play an important role in shaping dividend policies.
Is a shareholders agreement compulsory in South Africa? ›
Shareholder agreements are not required by law in South Africa, but they are highly recommended for companies with more than one shareholder. They provide a framework for corporate governance and company management, helping to ensure that the company is run efficiently and effectively.
Shareholder rights can vary. However, in many countries, including the U.S., their basic legal rights are: voting power, ownership, the right to transfer ownership, a claim to dividends, the right to inspect corporate documents, and the right to sue for wrongful acts.
Can a shareholder be forced to sell shares in South Africa? ›
A shareholder cannot be forced to offer his shares for sale, even if he is: running another business in competition with your company. dismissed for misconduct as an employee of the company. convicted of a crime such as theft or fraud.
What is the Gordon approach to dividend policy? ›
The Gordon model of dividends helps in determining the relationship between the valuation of a stock and the expected returns generated from the same. It exhibits how different variables like valuation, dividend growth rate, and dividend discount rate are closely interrelated.
Under what conditions might a company follow an irregular dividend policy? ›
Irregular dividend policy
If your business experiences an abnormally profitable quarter, for example, they can either decide to issue dividends or retain the profits and invest them back into the business. Generally speaking, irregular dividend policies are a good fit for companies that don't have a stable cash flow.
What is an optimal dividend policy? ›
The optimal dividend policy is simple: only distribute dividends when cash holdings exceed threshold , which depends on the state of the economy. This is done exactly as in the deterministic interest rate case. Namely, if the initial cash holdings exceed , then an initial dividend of x − x ( i ) is distributed.
What are the rules for dividends under companies Act? ›
(1) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year: Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.
What is Section 46 of the companies Act South Africa? ›
(1) A company must not make any proposed distribution unless: (a) the distribution: (i) is pursuant to an existing legal obligation of the company, or a court order; or.
Are South African companies exempt from dividends tax? ›
Dividends tax
Dividends are tax exempt if the beneficial owner of the dividend is an SA-resident company, SA-retirement fund or other prescribed exempt person.
What are the requirements for dividends under Corporation Act? ›
Circ*mstances in which a dividend may be paid
- (1) A company must not pay a dividend unless:
- (a) the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and.