When a company that has made huge profits in its previous quarters wants to share it with its investors, they do it through dividends. The company issues dividends on each share that is issued in the stock market. Dividends are also a way by which companies broadcast their positive growth and attract new investors. So if a company in your portfolio has also announced a dividend and you want to know when you will receive the promised amount, here is some important information for you.
Dividends are payouts companies issue to their shareholders as a share of their profits. However, not every company that makes a profit must issue dividends. It is entirely at the company's discretion if they want to share their profit with their investors in the form of dividends. A company announces dividends in terms of percentage.
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For instance, if the price of one share of a company is Rs 1000, and they announced a dividend of 3%, then each shareholder will get Rs 30 per share as a dividend. It is important to note that every company issues dividends at a fixed time, and you need to be aware of these dates to be eligible for dividends.
Investors will receive the dividend from the company in their bank account in about 30-45 days after the record date. The dividend is credited to the bank account that you have registered with your DEMAT account. And if you are someone who owns physical shares of the company, then the dividends will get to you in the form of a cheque via mail.
The date of payment of dividends also depends on the type of dividend a company is issuing. If a company issues an interim dividend, then the dividend needs to get credit within 30 days from the date of the announcement of the dividend. Whereas, if a company announces the final dividend, they need to make the payment of the dividend within 30 days of the AGM (Annual General Meeting). However, it is also essential for investors to check some important dates issued by the company regarding dividends to know if they are eligible for it.
Here are some dates that are issued by the company regarding dividend payout, and you need to keep an out for them to check your eligibility for dividends.
The declaration date is when a company announces the issue of dividends. This announcement includes the ex-dividend date, the dividend amount, and the dividend payment date.
The record date is when a company records the data of an investor for dividends. The shareholders who are not on the company's record will not be eligible for dividends. To become eligible for addition to this list, an investor should buy the company's shares two days before the dividend's record date.
These dates fall before the record date, and it is the cut-off date for buying the stocks of a company. So if you buy the share on the ex-dividend date or after it, then you will not be eligible for dividends.
This is the date on which the dividends are credited to the eligible shareholder's account. The dividend payment date is usually one month after the record date for the dividend.
Companies that pay dividends regularly follow a payout cycle that can be altered if the company wants. These payouts can be monthly, quarterly, annually, or semi-annually. However, in some cases, companies may announce dividends in between these cycles if they make exceptional profits. These one-time dividend payouts are often termed special dividends or interim dividends.
Dividends are the best way by which an investor can have a steady source of income that can either be reinvested in the stock market or can be used to fulfill personal needs. However, it is vital to keep an eye out for important dates such as ex-dividend dates and record dates to check your eligibility for the dividend and get an estimate of the final dividend payment. And once you have checked that you are eligible for the dividend, just relax and wait for it to get credited to your bank account on the dividend payment date.