What is Dividend Clientele?

Malcolm Tatum

A dividend clientele is a term used to collectively refer to the shareholders in a corporation who are in favor of implementing a specific set of dividend policies. Generally, the type of dividend policy desired by a dividend clientele is one that stands to provide the most benefits for the shareholders. However, the approach desired may or may not be in the best interests in the long-term operation of the company.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

It is not unusual for companies to issue preferred stock and pay dividends periodically on those shares of stock. In many cases, the structure for calculating and distributing those dividends may contain some discretion on the part of the company. This is often included as a safeguard to make sure the corporation does not become strapped for cash or possibly have to curtail activities that would eventually mean growth for the company.

The dividend clientele seek to have more input into how and when dividends are calculated and paid. While the clientele may consider the future operation of the company in creating their ideas on how to process dividends, that is not always the case. It is not unusual for dividend clientele to be focused more on what the shareholders have to gain in the short term.

One example of a motivating factor that is often involved when a dividend clientele wishes to refine current dividend distribution practices is the matter of gaining some type of tax advantage. This can be something as simple as arranging the schedule of payment of dividends so that they are received by the shareholders at the most advantageous times during the calendar year. Doing so can often allow the members of the dividend clientele to arrange their personal finances so that the reception of the dividend payments has minimal impact on the total amount of taxes owed for the period.

Companies do tend to listen to the desires of the shareholders that compose a dividend clientele. Often, there is some way to take the ideas and come to a compromise that affords the shareholders additional benefits while not hampering the function of the company in any manner.

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