Dividend

The purpose of any type of investment is to make a profit. We make a profit by investing through stock market, mutual fund, FD's, etc. However, the company distributes when there is more than one investor in a company or business, dividends among them in proportion to the investment. Any company pays dividends to its shareholders only when it get benefits, you can redirect the dividend as per your convenience. Dividends can be given in many ways.

Definition

Dividend is usually a cash payment made by a company to its shareholders. If you have invested in the company's stock, you can choose to pay dividends. You can get dividends by investing in common stock as well as resulted shares. A large amount is paid by the company in the form of dividends for investing in company’s stock. Dividends helps you to reduce your portfolio risk and show stability. Dividend payments also reduce losses caused by a drop in the stock prices.

How do Companies pay Dividends ?

The value of dividend is determined on a per-share basis. Dividend is paid on a specific date after declaration. It was given on this specific date. It is treated as an equal for all shareholders of a category. Although payment is made, only after being approved by the Board of Directors of the company, the dividend is paid based. When the company makes a profit then they decided to distribute some profit among the shareholders and earns the value of the share and a declaration is made about the record date. Dividends are paid to every shareholders on specific date.

Types of Dividend

Cash Dividend

Companies often prefer to pay this type of dividend or cash payment and it is sent directly from the company to the shareholder's account. Payment is usually made electronically but sometimes it can also be done through check. For example, on June 2, the board of directors of ABC International decided to pay a cash dividend of 250 per share to 200,000 shares of the company. Payment will be made after 4 months i.e. on 2 October.

Scrip Dividend

The company scrip dividends issues when the company does not have sufficient funds to issue dividends in the near future. A Scrip Dividend is a kind of billed promise letter that guarantees shareholders to pay on a due date in the future.

Bond Dividend

The company can also give dividends in the form of closed letters or front letters by not giving cash dividends. These bonds can be long term. This means that the company wants to distribute the profit on a specified date in future and not immediately.

Stock Dividend

Stock dividends are paid by issuing new shares to shareholders. Those who invest in common shares can opt for stock dividend payment. Stock dividends are considered superior to cash profit losses because the company gives the option to convert stock dividends into cash as per the wishes of the shareholders. For example, assuming the ABC company has announced a 30% dividend issue, this means that the stock of each shareholders of the company will increase by 30%. If you previously held 100 shares of the company, these are likely to increase by 30%.

Property Dividend

Companies are not limited to giving profits in the form of cash or stock to shareholders. Companies may also choose to issue monetary payments to shareholders in the form of securities or physical property or immovable property and others. For example, the board of directors of ABC International announced the release of 500 special dates signed by a famous artist that the company has been collecting for many years. The company acquired these copies for ₹ 50 Lacs and the date of the dividend declaration. The time market value of these has been ₹ 45 crore.

Liquidating Dividend

Companies pay liquidating dividends to their shareholders when they intend to close their business. In this case, the company pays the liquidating dividend to the shareholders when it pays the lender or borrowers. The closing or final payment is made by the company before closing and is paid based on the number of shares.

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