Dividends and IOE

Dividend Policy

According to Brazilian legislation, companies listed on the Stock Exchange are obliged to distribute a percentage of their profits to their shareholders, in the form of dividends or interest on equity (IOE).

Management believes that the most appropriate way to increase absolute dividends is from the cash generation it has been delivering, thus maintaining the policy of distributing a minimum of 30% of the adjusted net profit for the year, calculated in accordance with Brazilian accounting practices.

Since March 31, 2003, Metalúrgica Gerdau S.A. and Gerdau S.A . have been paying dividends and/or IOE quarterly as advance payment of mandatory dividends.

Payout and Yield

Payout and Yield

DIVIDEND DISTRIBUTION (R$ million)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1Q23 2Q23 3Q23 4Q23
Gerdau S.A.
Adjusted net income
(Dividend base)*
1,863 1,292 1,435 1,282 (4,551) (2,891) (359) 2,171 1,142 2,083 14,370 10,361 2,943 1,931 1,410 333
Dividends distributed 597 408 477 426 253 85 136 765 356 715 5,355 6,083 892 752 822 175
Pay-out 32.0% 31.6% 33.2% 33.2% 35.2% 33.5% 34.3% 37.3% 58.7% 30.3% 38.9% 58.3% 52.6%
Yield** 1.5% 1.7% 1.6% 1.4% 1.6% 1.1% 0.7% 3.6% 1.4% 2.1% 12.8% 13.5% 1.9% 1.8% 6.7% 5.1%

* Note to shareholders’ equity.
** Dividends paid per share during the fiscal year/share price at the beginning of the fiscal year.

Dividend Reinvestment Program (DRP)

Dividend Reinvestment Program (DRP)

The Dividend Reinvestment Program is optional and aims to offer participating shareholders the possibility to invest their dividends and/or interest on equity (IOE) in the purchase of preferred shares (PN) of the same company, in the secondary stock market in an organized and systematic way. This program offers several advantages to shareholders, including:

  • Reduced brokerage fees (0.25% brokerage and 0.035% pass-through of the fee charged by Bovespa) compared to the regular acquisition of shares; and
  • A gradual increase in their stake in Gerdau companies, thus increasing the amount of future dividends to which they are entitled.
Rules for shareholders to join the DRP:
  • Have their book-entry position registered with Banco Itaú (dividend and/or IOE credits paid through CBLC/brokerage firms are not eligible to DRP); and
  • Dividends and/or IOE credited to shareholders, must be less than R$5,000.00 per event and sufficient to purchase at least 1 share, including brokerage and fee expenses.
Parameters for joining the DRP:
  • Shareholders may choose the percentage of dividends to be reinvested, from 10% to 100% of the amount, always in multiples of 10%; and
  • Shareholders may change the chosen percentage or cancel the DRP at any time.
To join the DRP:

Indicate the company of which you are a shareholder:

  • Metalúrgica Gerdau S.A.
  • Gerdau S.A.

Fill in the requested data in the form available at the link below.

The contract must be signed and delivered to any Banco Itaú Unibanco branch, together with a copy of the identity card and taxpayer’s ID (CPF). Its becomes effective within 15 business days after the company receives it and checks the information provided.

Cancellation form:

Latest Bonus Shares

Latest Bonus Shares

Bonus Shares and Stock Splits

Date Event % Assigned unit cost *
04/28/2000 Unfolding 100%
04/30/2003 Bonus 30% R$ 11,70
04/29/2004 Bonus 100% R$ 11,70
03/31/2005 Bonus 50% R$ 11,70
03/31/2006 Bonus 50% R$ 11,70
05/30/2008 Bonus 100% R$ 4,88
03/01/2023 Bonus 5% R$ 11,55

*According to §1º of article 25 of Normative Instruction 25/2001 of the Internal Revenue Service.

Report in the Individual Income Tax Return

Report of Bonus Shares in the Individual Income Tax Return (IRPF in Portuguese)

The amont of bonus shares must be reported in the shareholder’s income tax return at their deemed cost as Exempt and Non-Taxable Income, under Earnings and Dividends Received. This same amount must be added to the historical cost of the shares in the Assets and Rights section.

Example:
On December 31, 2005, a shareholder owned 1,000 Gerdau S.A. preferred shares (GGBR4) reported in his income tax return at the cost of R$20,000.00 (amount paid for the acquisition of the shares).

On March 31, 2006, a 50% share bonus was approved, to be credited to shareholders based on the position held on April 12, 2006.

If said shareholder had maintained his position of 1,000 shares, he would have received 500 bonus shares (equivalent to 50% of the 1,000 shares held), thus having a balance of 1,500 shares.

As stated in a Notice to Shareholders, the deemed unit cost of Gerdau S.A. bonus share is R$11.70 per share. Thus, the total cost of bonus shares received by this shareholder is R$5,850.00 (R$11.70 in deemed unit cost, multiplied by the 500 bonus shares).

This amount must be reported in the income tax return in the Exempt and Non-Taxable Income section, under Earnings and Dividends Received, and added to the historical cost of shares in the Assets and Rights section.

In the example described above, the shareholder who, on December 31, 2005, had reported in his income tax return a historical cost of R$20,000.00 for his 1,000 shares now had a cost of R$25,850.00 for his 1,500 shares. When this shareholder sells his 1,500 shares, he must consider this new historical cost of shares i.e., R$25,850.00 for the purposes of calculating income tax on capital gains.

Legislation

LEGISLATION ON THE COST OF ACQUISITION OF SHARES

The legislation that deals with the cost of acquisition of shares received as a bonus is Article 25, Paragraph 1, of Normative Instruction 25/2001 of the Internal Revenue Service, transcribed below. The same article also deals with other ways of determining the determining the deemed cost of the acquisition of shares for the purposes of calculating capital gains.

Art. 25. In the spot markets, the net gain will be determined by the positive difference between the sale value of the asset and its acquisition cost, calculated based on the weighted average of the unit costs.

§ 1 In the case of shares received as a bonus, due to the incorporation of profits or profit reserves into the share capital of the legal entity, the cost of acquisition of the shares is considered to be the amount of the capitalized profit or reserve that corresponds to the shareholder or partner, regardless of the form of taxation adopted by the company.

§ 2 The provisions of the previous paragraph do not apply in the event of profits calculated in calendar years 1994 and 1995, in which case the bonus shares will have zero cost.

§ 3 In the absence of the amount paid for the asset, the acquisition cost will be:
I – upon inventory or probate, the appraisal value;
II – upon acquisition, the transfer value used to calculate the net gain of the seller;
III – upon conversion of debentures, the value of the share, set by the issuing company, in compliance with the provisions of § 5 of art. 17;
IV – the current value on the acquisition date.

§ 4 For the purposes of the provisions of art. 65 of Law 8,383, of December 30, 1991, the acquisition cost of the shares or membership units of a privatized company will be considered as:
I – the cost of acquiring rights against the federal government or government bonds issued by Brazilian states and municipalities, as well as the Federal District, in the case of an individual or legal entity not taxed based on taxable profit, including those that are exempt;
II – the book value of the bonds or credits delivered by the buyer on the transaction date, in the case of a legal entity taxed based on taxable income.

§ 5 The provisions of item II of the previous paragraph also apply to investment funds or companies and the securities portfolios mentioned in Annex IV to CMN Resolution 1,289, of March 20, 1987.

§ 6 In the case of shares acquired through conversion of debentures, the price effectively paid for the debenture may be computed as the cost of she shares.

§ 7 In the case of total or partial replacement of shares or change in number, as a result of incorporation, merger or spin-off of companies, the cost of acquisition of the shares originally held by the taxpayer will be attributed to the new shares received based on the same proportion established by the shareholders’ meeting that approved the event.

§ 8 The acquisition cost is equal to zero in the event of:
I – beneficiary shares acquired free of charge;
II – increase in the number of shares as a result of a stock split;
III – an asset whose value cannot be determined by any of the criteria mentioned in the previous paragraphs.

To obtain the full version of the Normative Instruction 25/2001 of the Internal Revenue Service, please access the Federal Revenue website (www.receita.fazenda.gov.br).