What is Dividend?

What is Dividend?

Any person makes any kind of investment to earn profit. People invest their money in different schemes like stock market, mutual funds, FD etc. to earn profit. When more than one person invests in a company or business.

So Dividend is received according to the investment ratio. The company gives dividend to the shareholders i.e. those who invest only when it makes profit. Dividend is paid in many ways. First let us understand What is dividend

Dividend In Share Market
Dividend :-

What is Dividend?

The cash payment made by the company to its shareholders is called Dividend. If you invest in preferred shares along with common stock, you are entitled to receive dividends. You can opt for payment of dividend while investing in the stock of the company.

When you invest in common stock, the company pays a large amount in the form of dividend when the price of the shares increases, whereas in preferred stock, a predetermined dividend is paid out. In the case of a preferred stock, the dividend payout is often higher than in the case of recognized stock or company bonds.

Dividend paid to common shareholders varies according to different companies. If there is a fall in stock prices right now and there is a loss, then the dividend payment reduces that loss as well. It helps in reducing volatility and portfolio risk.

How Dividend is paid

How Dividend is Paid :-

The dividend is determined on the basis of the value per share. After the declaration of the dividend, the company pays it on a specific date. This date is called the due date. When the company makes profit, it saves its profit and decides to distribute it among its shareholders.

After the approval of the Board of Directors of the company issues the shares for payment on the date of payment, due date and on record date.

There are six Types of dividend, which are as follows –

https://shareinfobazaar.com/my-portfolio/

Cash dividend :-

Most companies pay this type of dividend. It is a cash payment which is sent directly from the company to the shareholder’s account. Payment is usually done electronically, but sometimes payment can be made through cheque as well.

Stock dividend :-

Stock dividends are paid out by issuing new shares to shareholders. People investing in common stocks can opt for stock dividend payout. This dividend is considered better than the cash dividend. The company gives an option to the shareholders to convert the stock dividend into cash as per their wish.

Asset dividend :-

Companies can also make non-monetary payments in the form of dividends to shareholders in the form of physical assets, immovable property and others.

Dividend

Scrip dividend :-

When the company does not have sufficient amount to issue the dividend, the company can issue scrip dividend, a kind of promise which guarantees to pay at some future date.

Liquidating dividend :-

When a company is becoming a business, it pays its shareholders as a liquidating dividend. This is the final payment made by that company to the shareholders, this payment is made on the basis of the number of shares.

Special dividend :-

When a company pays a dividend other than its dividend payment policy, then it is called a special dividend. This special dividend is paid when the company makes more profit. This is known as additional dividend. This dividend is generally higher than the normal dividend.

In the US, some of the companies like Sun Microsystems, Cisco and Oracle do not pay dividends and reinvest their total profit in the business itself. Dividend payment usually does not affect the fundamental value of a company’s share price.

Companies with high growth rate and at an early stage of their ventures rarely pay dividends as they prefer to reinvest most of their profit to help sustain the higher growth and expansion. On the other hand, established companies try to offer regular dividends to reward loyal investors.

Also Read :-

https://shareinfobazaar.com/futures-trading/
https://shareinfobazaar.com/what-is-stock-market-crash/
https://shareinfobazaar.com/buy-now-stocks/

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