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How to issue dividends

Disclaimer: This document intends to provide the reader with a basic understanding of the role of surplus in a co-operative business and should not replace advice from an accountant or lawyer or the decisions made by shareholders.

Issuing Dividends to Members and Shareholders 

As your co-op’s year-end approaches, the board of directors will need to decide how it will handle its profits. Many co-ops will issue patronage dividends to members, and if your co-op has issued investment shares, you should issue dividends to shareholders. This resource will help you calculate your member and investor dividends and how you can issue funds.  

Your co-op’s bylaws will set out the formula for calculating dividends allocated to members and investors. However, you also need to be mindful of any obligations set out in shareholder or member agreements. For example, some co-ops promise a set rate of return each year when they sell shares to investors.  

To better understand how your board will allocate profits at year-end, check out this resource.  

Investment dividends 

Funds allocated to investors / total investment shares = amount paid per investment share 

An investment shareholder’s dividend cheque should equal the amount paid per investment share multiplied by the number of investment shares the shareholder owns.  

Amount paid per investment share x number of investment shares the shareholder owns = amount of the investment shareholder’s dividend cheque  

For example, if the co-op allocates $25,000 to investment shareholders, and has issued 150 investment shares, shareholders will be allocated $150.66 for each investment share they own (assuming taxes have already been paid).  

So, if Ryley owns three investment shares, the co-op will issue him a dividend cheque for $451.98. 

Member Patronage 

Member patronage is usually calculated based on one of the following options: 

  • The amount of goods and services purchased from the co-op 
  • The number of hours worked for the co-op 
  • The amount of goods and services sold to the co-op 
  • The amount of income generated for the co-op 
  • Number of membership shares purchased (total paid-up share capital) 

Each member’s share of the total member allocation will be determined using one of those options. For example, a member may receive $1.25 for each pound of seed they purchased from the co-op or $0.50 for each litre of wine they sold to the co-op. 

Equity Statement 

If your co-op issues profits to members, you’ll also need to provide them with an annual statement of their equity in the co-op. In the statement, explain how their dividend was calculated, what the co-op retained, and how much equity they’ve built over time. Check out this resource for more information and for a template. 


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