WHAT IS A DIVIDEND? :
When a company decided to share a part of the profit which they gained with their shareholders and investors through one of the corporate actions known as Dividend.
From the shareholder's point of view, they expect only one thing, that is the company's growth and profits. Hence Dividends are given as a capital appreciation by the company to its shareholders.
It basically strengthens the relationship between the company and investors.
HOW DOES THE DIVIDEND ACTUALLY WORK? :
Whenever a company makes a profit it can reuse the profit for the expansion of the company, or it can share the profit by issuing dividends to the investors. The company can also issue dividends even if the company didn't get any profit in a year. At that time, it may use the unused cash which they would have accumulated over the previous years.
WHEN DID THE COMPANY PAY THE DIVIDENDS? :
Interim Dividend: Dividend paid during the financial year.
Final Dividend: Dividend paid at the end of the financial year.
PROCESS OF RECEIVING DIVIDENDS:
To explain this process, I'm going to take an example here,
Let us consider the company Infosys Ltd has declared a dividend of ₹20 per share on 1st of April. And the current share price on the 1st of April is ₹1500 per share.
STAGE 1:
The date on which dividend is declared is known as the Dividend declaration date.
Hence, Dividend Declaration Date = 1st of April.
STAGE 2:
After stage 1, the company starts to prepare the list of shareholders who are eligible to receive the dividends. In accordance with the Companies Act, dividends must be paid within 30 days. So in our example, Record Date = 30th of April.
STAGE 3:
Now, two days before the Record date is known as the Ex-Dividend Day. In our example,
Ex-Dividend Date = 28th of April. The shareholders who owned the shares on this day are also eligible shareholders for receiving the dividend.
After this stage, the company will create the final list of shareholders who are eligible for the dividend and payout the dividend on the Record Date. (i.e. 30th of April).
DIVIDEND YIELD:
Dividend yield = Annualised Dividend / Current Market Price
= [₹20 / ₹1500] * 100 = 1.33%
With dividend yield, investors can calculate their expected return on investment as part of their total investment. There are sections of investors who like dividend-paying stocks. Dividends are thus an excellent means of attracting investors, so the higher the dividend, the better the stocks will be.
But, it is not that the companies which do not pay dividends to their shareholders are bad companies or non-profitable organizations. Those companies may have some other ideas of expanding their business, paying out their debts, etc.
To truly understand the cash deployment structure of that particular company, you should read the annual report of the company in detail and stay updated with the news about those companies.
I hope you all would have understood about the dividend, see you again in another post.
DISCLAIMER:-The content of this site is only for educational purpose. I am not SEBI Registered. The motive of this site is to share my knowledge on share market to new budding investors and others who are learning about stock market
My Kind request to my site viewers, Before taking any decision please do self analysis, consult or discuss with Your financial Advisor .
மறுப்பு:-இந்த தளத்தின் உள்ளடக்கம் கல்வி நோக்கத்திற்காக மட்டுமே. நான் செபியில் பதிவு செய்யப்படவில்லை. இந்த தளத்தின் நோக்கம், பங்குச் சந்தையைப் பற்றிய எனது அறிவை புதிய வளரும் முதலீட்டாளர்கள் மற்றும் பங்குச் சந்தையைப் பற்றி அறிந்துகொள்ளும் மற்றவர்களுக்குப் பகிர்வதாகும்
எனது தள பார்வையாளர்களுக்கு எனது அன்பான வேண்டுகோள், எந்தவொரு முடிவையும் எடுப்பதற்கு முன், சுய பகுப்பாய்வு செய்யுங்கள், ஆலோசனை செய்யுங்கள் அல்லது உங்கள் நிதி ஆலோசகருடன் விவாதிக்கவும்.
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