DIVIDEND IN STOCK MARKET - SOME FREQUENTLY ASKED QUESTIONS
What dividend means
Dividend is a portion of profit paid by companies to its share holders. It is a part of profit company shares with its share holders. The amount to distribute is usually determined by board of directors.
Dividend paying companies are commonly considered as stable since only profit making companies can pay dividend. But that may not be true always. Companies may not pay dividends due to various reasons. Some companies may reinvest all their profits to sustain its growth and for expansion. That is alright in case of a growing company. On the other hand a well established company with solid profits normally pays high dividends. If you hold the stocks, you will receive dividends in the form of checque or directly credited to you bank account if your mandate is registered with registrar.
Dividend can be a good source of income for risk averse investors. You will get a fixed amount of dividend for each of the stocks held. You may not see big capital appreciation as in the case of growth stocks. But you will get a regular income from good dividend yielding stocks. Historically, high dividend paying companies normally continue to do so. Stock selection is important here. Company and management should be trustworthy as you may keep stocks for long term for regular income. Normally big PSU government companies give good dividends. We will discuss high dividend yielding companies in another post.
Dividend announcement date
Cum bonus
What is record date in dividend?
To become eligible for receiving dividends, investors need to hold ownership of the company's shares as on the record date in their demat account. The record date is usually set a few days after the dividend announcement date. Indian stock markets follow T+2 rolling settlement, hence for the shares to reflect in your demat account on the record date, they need to be purchased at least two working days prior.
With the record date serving as the register of eligible dividend recipients, it becomes pertinent for investors to track upcoming record dates for their portfolio stocks. Building alerts around dividend announcements and record dates can help ensure investors don't miss out on potential dividend income. Especially for stocks bought specifically for dividends, actively monitoring ownership as per record date is vital. For profitable long-term investing, the record date sets the timeline for strategic share buying decisions focused on regular dividend earnings.
What is ex dividend date in dividend?
Dividend payment date or When dividend is paid?
Book closure date
How dividend is paid?
Getting your share of dividends is much easier if your bank details are updated with your stock account. This way, once the company announces dividends, your share will automatically be transferred to your bank through NEFT payment. The money gets credited directly without you having to do anything.
If your bank details are not updated, the company will send you a physical cheque for the dividend amount. You will then need to deposit this cheque into your bank account to get the money. This can be inconvenient if the cheque expires or gets lost in transit.
So make sure your stock account has your correct bank account number, IFSC code and branch details. Inform your stock broker or registrar if these change. This way you won't miss out on the dividends you earned - they will come directly to your bank on the payment date.
One less headache to deal with! Just keep your details current and receive smooth automated dividend transfers into your bank whenever companies you own shares in announce dividends.
What is dividend distribution tax
Tax on dividend income
Tax on dividend yield from mutual fund
What is dividend yield?
Only high dividend yield should
not be a parameter in selecting stocks. Sometimes a falling stocks can have
high dividend yield due to price fall. But it may not be a good investment.
All other parameters to select a good stock including management quality should also be considered here in stocks selection. Government
policies also can affect dividend income.
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How dividend is calculated ?
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