What are patronage dividends?
Cooperatives exist not to generate a profit for themselves or outside investors, as do other businesses, but rather to provide goods and services at the lowest possible cost. Net margins (the excess of income over expenses in the cooperative) if any, are distributed to member patrons in proportion to their use of the cooperative in the form of patronage dividends. How is this accomplished? Once a year, a formal accounting determines a cooperative’s income and expenses. Income remaining after deducting all expenses (net margin) is then distributed in proportion to patronage. In other words, the income in excess of expenses generated by a member’s use of the cooperative is refunded to them. This is called a patronage refund. The patronage refund is an important source of financing for cooperatives. Members usually elect to leave a portion of the refund in the cooperative to help keep its operations on solid financial ground. Return to Top What is a cooperative? A cooperative is an autono
