What does dividends passed mean in terms of stock?
"A ""covenant"" is a solemn promise to engage in or refrain from a specified action. Every company must do a balancing act while declaring the dividends in terms of companies interest (can it use the surplus cash to generate more revenue) to shareholders' interests, giving back to them the profits that due. Many countries have regulations governing as to when and how much the dividends may be given. It also lays out the policy about declaring dividends to protect everyones' interest. For example if the company has a huge suit pending against it, the company is not supposed to distribute the surplus cash as dividends and when the suit goes against it, its left when no money to pay ... or other such examples where the interests of one or the other party is compromised. The company law board ensures that all this is adhered to in a fair manner. So essentially ""these covenants include provisions about passing dividends"", means that due diligence has be exercised by the company in order to arrive at the dividends that are to be paid out."
It is just a different category of stock issued by a company that gives its owners different treatment when it comes to dividend payment and a few other financial transactions. Preferred stock holders get treated with some preference with regard to the company's profits and assets. For example, dividends are typically guaranteed to preferred stock holders whereas the leadership in the company can elect at any time not to pay dividends to common stockholders. In the event the company is liquidated, the preferred stockholders also get to be in line ahead of common stockholders when the assets are distributed. Unless you suffer from the illusion that you can time the market, it honestly doesn't matter much; the difference is lost in the noise. That may be true even if you do suffer from that illusion.  Also, as discussed here previously, the drop in a stock's price right after the dividend has been paid just reflects the fact that you aren't about to get an immediate refund in the form of a dividend. If you look at the real cost per share, it's meaningless and can/should be ignored. Buying after the dividend is paid may save you a tiny fraction of a cent of short-term income tax, but that's meaningless in real terms. I know that in the case of cash dividends I will get the dividend as long as I bought the stock before the ex-date but what happens in the case of an stock dividend? This is same as cash dividends. You would receive the additional stock. "New SEC rules also now allow brokers to collect fees on non-dividend bearing accounts as an ""ADR Pass-Through Fee"". Since BP (and BP ADR) is not currently paying dividends, this is probably going to be the case here. According to the Schwab brokerage firm, the fee is usually 1-3 cents per share. I did an EDGAR search for BP's documents and came up with too many to read through (due to the oil spill and all of it's related SEC filings) but you can start here: http://www.schwab.com/public/schwab/nn/m/q207/adr.html" The shareholders have a claim on the profits, but they may prefer that claim to be exercised in ways other than dividend payments. For example, they may want the company to invest all of its profits in growth, or they may want it to buy back shares to increase the value of the remaining shares, especially since dividends are generally taxed as income while an increase in the share price is generally taxed as a capital gain, and capital gains are often taxed at a lower rate than income. Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares. "It means that the company earned 15 cents per share in the most recently reported quarter. Share price may or not be affected, depending on how buyers and sellers value the company. Just because profits ""jumped,"" does not mean the shares will follow suit. An increase in profits may have already been priced into the stock, or the market expected the increase in profit to be even higher. As the shareholder, you don't actually get any of these profits into your hands, unless the company pays out a portion of these profits as a dividend." If you receive dividends on an investment, those are taxed. "The stock should fall by approximately the amount of the dividend as that is what is paid out. If you have a stock trading at $10/share and it pays a $1/share dividend, the price should drop to $9 as what was trading before the dividend was paid would be both the dividend and the stock itself. If the person bought just for the dividend then it would likely be neutral as there isn't anything extra to be gained. Consider if this wasn't the case. Wouldn't one be able to buy a stock a few days before the dividend and sell just after for a nice profit? That doesn't make sense and is the reason for the drop in price. Similarly, if a stock has a split or spin-off there may be changes in the price to reflect that adjustment in value of the company. If I give you 2 nickels for a dime, the overall value is still 10 cents though this would be 2 coins instead of one. Some charts may show a ""Dividend adjusted"" price to factor out these transactions so be careful of what prices are quoted." "Because I feel the answers given do not wholely represent the answer you are expecting, I'd like to re-iterate but include more information. When you own stock in a company, you OWN some of that company. When that company makes profit, you usually receive a dividend of those profits. If you owned 1% of the company stock, you (should) recieve 1% of the profits. If your company is doing well, someone might ask to buy your stock. The price of that stock is (supposed) to be worth a value representative of the expected yield or how much of a dividend you'd be getting.  The ""worth"" of that, is what you're betting on when you buy the stock, if you buy $100 worth of coca cola stock and they paid $10 as dividend, you'd be pretty happy with a 10% growth in your wealth. Especially if the banks are only playing 3%. So maybe some other guy sees your 10% increase and thinks, heck.. 10% is better than 3%, if I buy your stocks, even as much as 6% more than they are worth ($106) I'm still going to be better off by that extra 1% than I would be if I left it in the bank.. so he offers you $106.. and you think.. awesome.. I can sell my $100 of cola shares now, make a $6 profit and buy $100 worth of some other share I think will pay a good dividend. Then cola publicises their profits, and they only made 2% profit, that guy that bought your shares for $106, only got a dividend of $2 (since their 'worth' is still $100, and effectively he lost $4 as a result. He bet on a better than 10% profit, and lost out when it didn't hit that. Now, (IMHO) while the stock market was supposed to be about buying shares, and getting dividends, people (brokers) discovered that you could make far more money buying and selling shares for 'perceived value' rather than waiting for dividends to show actual value, especially if you were not the one doing the buying and selling (and risk), but instead making a 0.4% cut off the difference between each purchase (broker fees). So, TL;DR,  Many people have lost money in the market to those who made money from them. But only the traders and gamblers." All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset. "If a stock is trading for $11 per share just before a $1 per share dividend is declared, then the share price drops to $10 per share immediately following the declaration. If you owned 100 shares (valued at $1100) before the dividend was declared, then you still own 100 shares (now valued at $1000). Generally, if the dividend is paid today, only the owners of shares as of yesterday evening (or the day before maybe) get paid the dividend. If you bought those 100 shares only this morning, the dividend gets paid to the seller (who owned the stock until yesterday evening), not to you. You just ""bought a dividend:"" paying $1100 for 100 shares that are worth only $1000 at the end of the day, whereas if you had just been a little less eager to purchase right now, you could have bought those 100 shares for only $1000. But, looking at the bright side, if you bought the shares earlier than yesterday, you get paid the dividend.  So, assuming that you bought the shares in timely fashion, your holdings just lost value and are worth only $1000.  What you do have is the promise that in a couple of days time, you will be paid $100 as the dividend, thus restoring the asset value back to what it was earlier.  Now, if you had asked your broker to re-invest the dividend back into the same stock, then, assuming that the stock price did not change in the interim due to normal market fluctuations, you would get another 10 shares for that $100 dividend making the value of your investment $1100 again (110 shares at $10 each), exactly what it was before the dividend was paid. If you didn't choose to reinvest the dividend, you would still have the 100 shares (worth $1000) plus $100 cash. So, regardless of what other investors choose to do, your asset value does not change as a result of the dividend.  What does change is your net worth because that dividend amount is taxable (regardless of whether you chose to reinvest or not) and so your (tax) liability just increased." It might, but it also might not. The Board of Directors gets to decide whether and how much dividends are paid to stockholders. So this will vary from company to company and may change over time. I suggest you ask the person making the offer. That said: It looks like they offered you OPTIONS, not Shares. An option is just the right to buy stock at a given price in the future. It is extremely unlikely that you would be entitled to any dividends since you don't have an ownership stake, just a potential to be a shareholder. There are many reasons for buying stock for dividends.  You are right in the sense that in theory a stock's price will go down in value by the amount of the dividend. As the amount of dividend was adding to the value of the company, but now has been paid out to shareholder, so now the company is worth less by the value of the dividend. However, in real life this may or may not happen. Sometimes the price will drop by less than the value of the dividend. Sometimes the price will drop by more than the dividend. And other times the price will go up even though the stock has gone ex-dividend. We can say that if the price has dropped by exactly the amount of the dividend then there has been no change in the stockholders value, if the price has dropped by more than the value of the dividend then there has been a drop to the stockholder's value, and if the price has gone up or dropped by less than the value of the dividend then there has been a increase to the stockholder's value. Benefits of Buying Stocks with Good Dividends: What you shouldn't do however, is buy stocks solely due to the dividend. Be aware that if a company starts reducing its dividends, it could be an early warning sign that the company may be heading into financial troubles. That is why holding a stock that is dropping in price purely for its dividend can be a very dangerous practice. Depends on if the investment options are changing. If the investments don't change then you will still receive your dividend. If they are changing, your company is legally obligated to inform you what new investment your money will be transferred to.