The Company Can Declare Cash and/or Stock Dividends Out of Its Quarterly Profits

June 18, 1987 BIR RULING NO. 172-87 21 000-00 172-87 Gentlemen : This refers to your letter dated May 29, 1987 requesting opinion as to whether your company can declare cash and/or stock dividends out of quarterly profits and/or surplus. It is represented that your company has been issuing cash and stock dividends for the last five (5) years; that during the early part of this year, you have issued 50% dividend out of accumulated retained earnings, and that since your company has been making profit as early as the first quarter of this year, you intend to declare cash and/or stock dividend out of quarterly profit. In reply thereto, I have the honor to inform you that an ordinary dividend is the most common type of corporate distribution, and is defined as (1) a distribution of property by a corporation to its stockholders (2) made in the ordinary course of its business (3) out of its earnings and profits. (par. 2251 2d Am. Jur. 33) Thus, a dividend is a corporate profit set aside, declared and ordered by the directors to be paid to the stockholders on demand or at a fixed time (Fisher vs. Trinidad 43 Phil. 973). It is distinguished from "profits" for the profits in the hands of a corporation do not become dividends until they have been set apart, or at least declared, as dividends and transferred to the separate property of the individual stockholders (Hyatt vs. Alen 56 N.Y. 553) Such being the case, your company can declare cash and/or stock dividends out of its quarterly profit. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner