Don’t Know What Is Dividend, Ex-Date, Record-Date, And Different Types Of Dividends.
Then You Have Came To The Right Place, In This Article All Your Doubts Will Be cleared.
What Is Dividend ?
Dividend Is Nothing But, The Company Giving Its Profits To The Share Holders In The From Of Cash Or If The Company Have Enough Cash Reserves, Then Also The Company Will Announce A Dividend.
The Amount Is Directly Credited To The Bank Account.
The Companies Will Announce The Results For Every Three Months Known As Quarterly Results. While Declaring The Results Some Companies Will Also Announce Whether They Are Giving A Dividend Or Not.
It Is Up To The Company Whether To Give Or Not. It Is Not Compulsory.
Instead Of Giving Dividends The Company Can Use The Profits To Expand Their Business Or Can Spend To Innovate New Products Or Services.
Most Of The Companies Will Not Give Dividends. Instead, They Spend The Profits To Expand Their Business.
Types Of Dividends
There Are Three Types Of Dividends.
Final Dividend
The Dividends Announced At The End Of The Financial Year ( April 1 To March 31 ) Are Known As Final Dividends.
Interim Dividend
The Dividends Announced Before The Annual General Meeting Of The Company Or In The Middle Of The Financial Year Are Known As Interim Dividends.
Special Dividend
Company Declares A Special Dividend If They Have Lot Of Cash Reserves Or Like When A company Sold Their And Assets ( Properties Or Inventory )The Company Will Make Lot Of Money. So The Company Will Give The Cash To Its Share Holders In The Form Of Dividends.
This Is All About The Types Of Dividends.
Announcement, Ex-Date, Record And Payment Dates
ANNOUNCEMENT DATE
It Is The Date On Which The Company Announced The Dividend, The Date Is Called the Announcement Date.
Ex-Dividend Date Or EX-DATE
When A Company Announces A Dividend The Company Also Announces the Ex-Date.
One Who Buys The Shares Before The Ex-Date And Holds Till The Ex-Date Are Only Eligible For The Dividend.
If You Bought Share Before The Ex-Date And If You Sold The Stock On Ex-date. Still, You Are Eligible For Dividend.
If You Bought The Share On Ex-Date Or After Ex-Date You Are Not Eligible For Dividend.
RECORD DATE
On Record Date, The Company Will Check The Details Of The Share Holders List.
To Receive The Dividends, On Record, We Need To Have The Shares In Our Demat Account. So If We Buy Shares Before Ex-Date Only The Shares Will Be Delivered To Demat Account On Or Before Record Date.
Record Date Is Always Trading Day After The Ex-Dividend Date. For Example, If Ex-Date Is 08-10-2021, Then the Record Date Will Be 09-10-2021. If There Is A Holiday On 09-10-2021 Then the Record Date Will Be 10-10-2021.
But No Need To Bother About the Record Date. If You Want To Get The Dividend Just Buy The Shares Before Ex-Date.
Payment Or Payout Date
On Payment Date, The amount Will Be Directly Credited To Your Bank Account.
Understanding With Example
For Example, Tata Motors Is Trading At 200 Rupees And an Announced Dividend Of 10 Rupees On 05 September And The Ex-Date Is 10 October And The Record Date Is 11 October.
Eligible For Dividends :
To Eligible, You Can Buy Tata Motors On Any Date Before Ex-Date, But You Need To Hold till Ex-Date. It Means 10 October. If You Sold On Ex-Date Also, Still you Are Eligible For Dividend.
You Might Think That One Need To Have The Shares In DEMAT Account On a Record Date, But How Will They be Eligible If They Sell Their Shares On Ex-Date.
In India The Settlement Time Is T+2 Days Means If you Bought Shares On Monday The Shares Will Be Delivered To Demat Account On Wednesday.
So If We Sold On Ex-Date It Will Take 2 Days To The Buyer Of Our Shares To Get Delivered To His DEMAT Account, But The Record Date Is Just After The Ex-Date Which Is One Day Only And The Company Will Check the List Of Share Holders On Record Date.
And The Shares Sold On Ex-Date Are Not Yet Delivered To The Buyer On Record Because Record Date Is Just After Ex-Date Which Is One Day And The Settlement Time Is 2 Days. So The Company Will Consider The Seller As The Owner Of The Shares And The Company Will Give The Dividend To The Seller Who Sold On Ex-Date.
The Dividend Amount Is 10 Rupees, So Tata Motors Will Trade At 190 Rupees From Ex-Date. The 10 Rupees Dividend Amount Will Be Reduced From The Share Price.
Then You Might Thing What Is The Use Of Dividends If It Is Reduced From Share Price. But The Advantage Is The Share Price Will Be Attractive Or At Good Valuation For New Investors, So Now More Investors Will Show Interest To Buy Then Automatically Share Price Will Increase.
Not Eligible For Dividends :
If You Bought On Or After Ex-Date You Are Not Eligible.
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