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Patronage dividends are just one of several forms of dividends, beginning with traditional dividends. These are distributions of a portion of a company's earnings, issued as cash payments, shares of stock, or other property. Startups and other high-growth companies rarely offer dividends, preferring instead to reinvest any profits to help sustain higher-than-average growth.
Larger, established companies with more predictable profits are often the best dividend payers, such as those in basic materials, oil and gas, banks and financial, healthcare and pharmaceuticals, and utilities.
Special dividends or extra dividends are non-recurring distributions of company assets. These usually occur after exceptionally strong company earnings results or when a company wishes to spin off a subsidiary company to its shareholders.
A capital dividend or return of capital is a payment that a company makes to its investors. Capital dividends are drawn from a company's paid-in-capital or shareholders' equity , rather than from the company's earnings as with traditional dividends.
Capital dividends generally occur in instances where company earnings cannot facilitate cash payment. Dividend Stocks. Income Tax. Your Privacy Rights.
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Because this year's Patronage Dividends are based on sales at Central Co-op, only those who were owners of Central Co-op in and shopped at the Seattle store pre-merger recieve a dividend. Have more questions? Please e-mail aaronw [at] centralcoop. Co-ops are a different kind of business. Unlike shareholder corporations, co-ops are owned by community stakeholders and run democratically for their benefit. This means you!
Generally, in a traditional corporation, a few investors will put in most of the money, get most of the benefits, and determine the direction in which the business will go. In March, the Board of Trustees decided that it will return profits back to its owners through patronage dividends, because it represents a great way to balance two priorities: the need to provide benefits that make ownership in Central Co-op unique and rewarding, and to ensure that the Co-op is financially successful for the long term.
As owners of other consumer co-ops with patronage dividend programs such as REI will know, patronage dividends are returned in proportion to how much money a person spends at a co-op. In years that the co-op does well, the owners can share its success by getting a larger dividend. If the co-op has a leaner year due to increased competition or has a need for reinvestment, it can choose to save more internally and distribute less.
All businesses require financing to operate, whether it is to purchase new equipment, remodel a store, or open new stores to serve more people. A corporate entity can raise money by selling shares to anyone who is willing to put up money and can more easily obtain a traditional bank loan. A co-op depends on its many owners to invest small amounts of money by joining and agreeing to reinvest their profits. This is both a blessing and a challenge.
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