What is dividend?

Shareholders earn returns on their equity investment in two ways: through capital appreciation and by receiving dividends paid by companies. A dividend is a payment made by a corporation to its shareholders, representing a share of the company’s profits. You will be eligible for dividends if you purchase stocks before the ex-date. If you purchase shares on or after the ex-date, you will not be eligible for the dividend. Dividends are usually paid in cash (cash dividend), but sometimes companies issue them in the form of stocks (stock dividend). Dividends are credited to your bank account linked to your Demat account. The dividend yield is an important factor for many investors. It is calculated as: Dividend Yield = Full-year Dividend / Current Share Price. Example: If ABC Ltd declares a dividend of ₹5/share and the market price is ₹250, then Dividend Yield = 5/250 = 0.02 or 2%.

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