Dividend DEFINATION
It is a distribution of profits of a company to its shareholders or investors .
Why it is given to shareholders ?
Companies generally share some of their profits with investors when they have enough cash left after expenses. This practice is fairly common, particularly among big, stable corporations that generate lots of money and have no need to reinvest proceeds back in the business.
How it is beneficial for a investor ?
It is beneficial for investors because its a share of additional profits which company share with its shareholders or investors it acts as passive income of investors or shareholder
For Example – if you are a investor in reliance company and you bought 1000 share of reliance at 500 Rs per share so if reliance declared a dividend of 20 Rs per share at its annual general meeting so you are eligible for it because you are a investor in reliance company and you have rights to get the benefit of it so in this case your dividend is 20,000 Rs and you will also take the benefit of capital appreciation if reliance share value increases from 500 Rs to 2500 Rs you will also reap the benefits of capital appreciation which means your investment of 5,00,000 Lakh rupees is now become 25,00,000 Lakh Rs
What is dividend yield ?
It is a stock’s annual dividend payments to shareholders expressed as a percentage of the stock’s current price. This number tells you what you can expect in future income from a stock based on the price you could buy it for today, assuming it remains unchanged.
For example- if a stock trades for 100 Rs per share today and the company’s annualized dividend is 5 Rs per share, the yield is 5%.
Types
There are seven types of dividends: cash, stock, property, scrip, special, bond, and liquidating. The company’s board of directors decide to pay dividends and its types.
In Accounting two types of is discussed for a company :
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Proposed – both on equity shares and preference shares are paid after being declared (approved ) by the shareholders in the Annual General Meeting . Annual General Meeting is held after the end of financial year which means the next financial year
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Interim – It is a is declared by the board of directors and also paid within the same financial year . it does not require approval of shareholders
How it is distributed to investors or shareholder
Whatever the amount is decided by board of directors of a company to be distributed to its share holders is directly credited to the shareholder bank account.
Top Companies in India which offer high dividend yield
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ITC
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COAL INDIA
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HINDUSTAN ZINC
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POWER GRID CORPORATION
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VEDANTA
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TECH MAHINDRA
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INDIAN OIL
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HCL TECHNOLOGIES
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Check out for more from external sources:
https://en.wikipedia.org/wiki/Dividend