If a corporation pays a dividend, which group receives priority in receiving the dividend?
bond holders
holders of common stock
holders of preferred stock
dividends are evenly divided by holders of common and preferred stock
I'll be glad to check your answer.
When a corporation pays a dividend, the group that receives priority in receiving the dividend depends on the company's dividend policy and the terms of its financial agreements with different investors.
1. Bond Holders: Bondholders generally have priority over stockholders in receiving dividends. Bondholders lend money to the corporation by purchasing bonds, which are considered as debt. They earn fixed interest payments and have a contractual right to be paid before any dividends are distributed to stockholders.
2. Holders of Preferred Stock: Preferred stockholders usually have a higher claim on dividends compared to common stockholders. Preferred stock is a hybrid security that combines characteristics of both stocks and bonds. Preferred stockholders hold a preference or priority in receiving dividends over common stockholders. They typically receive a fixed dividend rate, although the specific terms can vary.
3. Holders of Common Stock: Common stockholders are the owners of the corporation and typically have a residual claim on the company's assets and earnings. Dividends for common stock are usually paid after bondholders and preferred stockholders have been paid. The amount of dividend paid to common stockholders is subject to the company's profitability, dividend policy, and the proportion of earnings allocated to them.
Please note that some companies may have different classes of preferred stock, which gives varying degrees of dividend priority. It's important to review the corporate bylaws, articles of incorporation, and preferred stock terms to determine the specific rights of investors in a given corporation.