Dividends are issued by a company to its investors, usually when a company makes huge profits in the previous quarter and is willing to share it with the investors. To do that, a company announces the dividend with the record date, dividend amount, and ex-dividend date. Based on the record compiled by the company on the record date, the company sends out email notifications to the shareholders regarding the upcoming dividend. Before we get into the details of what you should do if you receive such an email, let's discuss what the dividend is, its benefits, and when it will get credited to your account.
What is a dividend?
A dividend is a reward issued by a publicly listed company to its shareholders. The dividend is part of the company's income. When a company earns a high net profit, it rewards its shareholders after deducting all the expenses that are required to be met. Dividends can be in any form, such as shares, cash and cash equivalents. The board of directors decides the dividend amount with the majority approval of shareholders.
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What are the Benefits of dividends to an investor?
A dividend-yielding company communicates to investors about their financial health and value through dividends. An investor always looks for a company that has a decent dividend yield and tends to grow steadily over time.
Some other benefits of dividends to an investor are:-
- The growth and expansion of a company are very important for investors; they can be determined through the ability of the company to give dividends.
- Dividends can be found helpful in equity evaluation and stock selection analysis by the investor.
- Investors also look for dividends to manage the risk and volatility of their overall portfolio.
- The received dividends can again be invested, and a good amount of profit can be earned.
Why does a company issue dividends?
A company that issues dividends regularly sends out a message about its business's current performance and profitability. Such companies are far less risky to invest in than others, as they have good cash flows and stable economic growth.
Here are the following reasons why companies issue dividends:
- A company declares its dividend to attract more potential investors.
- To provide certainty of the company's profitability to the shareholders.
- To show their better financial health and future prospects.
- Dividends are issued to share profits among the shareholders. This way, shareholders remain intact with the company.
What to do after receiving an email regarding a dividend?
When a company issues a dividend to its investors and shareholders, it sends a structured mail mentioning the entire details of the dividend, such as the dividend rate or the number of stocks. So, if you receive mail regarding the declaration of a dividend, you should know that the company has issued a dividend to you. But the dividend amount won't get credited to you immediately. It may take up to 30 days to get credited into your bank account that has been registered with the DEMAT account.
When will the dividend get credited?
The dividend will be delivered to the shareholders or investors in their registered bank account within 30 to 45 days after the dividend has been declared. And the physical shareholders of the company will get their dividends through cheques on their registered mail id.
Moreover, the payment date of dividends will vary according to the payout cycle of the dividend. For example, if a company declares an interim dividend, it will get credited to your account within 30 days of declaration. And if the company declares a final dividend, it will be credited within 30 days of the Annual general meeting of the company.
If you receive dividends from a company, the company doesn't need to keep on sending dividends every quarter. Therefore, you should not invest based on the dividend payouts of a company only. And if you do get an email regarding the issue of the dividend, sit back and wait for it to get credited to your bank account.