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To record a dividend, a reporting entity should debit retained earnings (or any other appropriate capital account from which the dividend will be paid) and credit dividends payable on the declaration date.
A dividend equivalent right entitles the recipient to receive credits equal to the cash or stock dividends or other distributions that would have been received on shares of stock had the shares been issued and outstanding on the dividend record date.
For a securities lending or sale-repurchase transaction, the amount of the dividend equivalent for each dividend on an underlying security equals the amount of the actual per-share dividend paid on the underlying security multiplied by the number of shares of the underlying security.
A dividend equivalent payment is treated as a dividend from sources within the United States. ingly, the dividend is subject to the flat 30-percent withholding tax (or lower withholding tax rate, if provided for by a treaty) if received by a nonresident alien or foreign corporation (IRC § 871(m); Reg. §1.881-2).
Cash dividends affect option prices through their effect on the underlying stock price. Because the stock price is expected to drop by the amount of the dividend on the ex-dividend date, high cash dividends imply lower call premiums and higher put premiums.