What is a patronage dividend and how is it paid out by an Ontario co-operative?

A patronage dividend (sometimes called a patronage return) is a distribution of an Ontario co-operative's surplus to its members based on how much business each member did with the co-operative during the relevant period, rather than in proportion to how many shares that member holds. A consumer co-operative might calculate it based on how much a member purchased; a producer co-operative might calculate it based on how much product a member supplied through the co-op.

This is one of the features that sets a co-operative apart from a regular business corporation, where profit is distributed to shareholders as a dividend based on share ownership regardless of whether that shareholder actually did business with the company. The specific formula, timing, and whether patronage returns are paid in cash, credited to a member's account, or issued as additional shares is set out in the co-operative's own bylaws and policies rather than by a single fixed rule, so the details differ between co-operatives. Members wanting to understand exactly how and when they'll receive a patronage dividend should check the specific co-operative's bylaws rather than assume a standard approach applies everywhere.