Cutting a Melon
What Is Cutting a Melon?
"All cutting a melon" is a phrase utilized when a company chooses to issue an extra dividend that is far in excess of the original schedule of dividend payouts, which will likewise be distributed to some or its shareholders. This extra dividend might come as cash, stock, or property.
Figuring out Cutting a Melon
Cutting a melon is the privilege of the board of directors (B of D). The B of D sets a company's dividend policy, which determines whether and how to convey earnings with shareholders as dividends. A company's dividend policy may pay shareholders in relation to fluctuating corporate earnings, or it might offer a payout unconcerned with short-term variances. Dividends commonly come month to month or quarterly, yet they might come at other normal stretches, for example, semi-yearly or yearly.
After a period of higher-than-normal earnings, the B of D might decide to cut a melon, i.e., convey the extra profit relatively among shareholders, instead of add it to retained earnings, which a corporation might use to reinvest or pay down debt.
Not at all like a scheduled dividend payment, a payment that comes from cutting a melon is determined by the B of D dependent upon the situation. It could be issued to shareholders as a separate disbursement well beyond the standard number of scheduled dividend payments, however for convenience, the company's internal accounting might associate it with a scheduled dividend payment.
Instance of Cutting a Melon
For instance, in the event that a company with 1 million shares earned $4 million in profit past what it had anticipated, its B of D might decide to cut a melon, giving a special dividend payment of $4 per share. To cut a melon while keeping more cash close by, the B of D might decide to issue the payment in stocks all things being equal.
Companies That Are More Likely to Cut a Melon
Blue-chip companies, large corporations that have endured different downturns, are in the best position to cut a melon when confronted with a startling surplus. Youthful startup companies with desires to develop a lot larger, then again, have a greater incentive to reinvest the surplus profit in the business itself.
Financial experts differ on the value of dividends overall. Some believe dividends to be the ultimate [measure of a company's value](/bird close by). Others contend that whether a company pays a dividend is irrelevant to the investor. There are the people who advocate never paying dividends. Thusly, a company's dividend policy, as well as its decision to cut a melon, might be determined as much by its business philosophy as by its height and longevity. Berkshire Hathaway, a multinational conglomerate, broadly hasn't paid a dividend to its investors beginning around 1967.
Features
- Larger, more settled companies are bound to give out the extra dividend than more modest or fresher companies that could like to take the extra profit and reinvest it.
- A company's board of directors might choose to give an extra dividend because of a period of especially strong earnings.
- Cutting a melon is something a company's board of directors settles dependent upon the situation.
- "Cutting a melon" is Wall Street shoptalk for giving shareholders an extra dividend that is separate from ordinarily scheduled dividend payouts.
