3. What do interest on equity (JCP) and dividends mean? Which is the difference between them?

The dividend is shareholder’s share in the company’s profit. Whenever a company record profits, it earmarks part of this result to share with its shareholders. In Brazil, companies are required to pay, at least, dividends of 25% of profit.

The return on dividends may be referred to as dividend yield of a share and corresponds to the dividend paid divided by share price. Besides dividends, the companies also pay interest on equity (JCP), which means another way of sharing profit with the companies’ shareholders. The difference is such payment is treated as expense in the company’s results, while dividend not.