A Dividend is a distribution of a company's earnings or eligible reserves to its shareholders, generally made as a reward for investing in the business.
Companies may distribute part of their profits as dividends while retaining the remaining earnings for expansion, debt repayment, or future operations.
Dividends are commonly paid in cash, although companies may also distribute additional shares or other permitted assets.
Key features of dividends include:
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Cash Dividend: Shareholders receive a specified cash amount for each eligible share.
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Stock Dividend: A company distributes additional shares instead of cash, subject to applicable laws and regulations.
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Interim Dividend: A dividend declared by the company's board of directors between annual general meetings.
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Final Dividend: A dividend recommended by the board and approved by shareholders at the annual general meeting.
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Dividend per Share (DPS): The total dividend amount payable for each eligible share.
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Dividend Yield: The annual dividend per share expressed as a percentage of the current market price.
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Dividend Eligibility: Investors must hold shares according to the applicable record date and settlement requirements to receive dividends.
For example, a company declaring a ₹10 dividend per share would distribute ₹2,000 to an eligible shareholder holding 200 shares.
Dividends provide investors with potential income without requiring them to sell their shares.
However, dividend payments are not guaranteed, and companies may reduce or suspend them depending on profitability, cash availability, and financial priorities.