What is a dividend? Types and calculations of dividends

What is a dividend? Types and calculations of dividends

Anyone makes any kind of investment to make a profit. People invest their money in various schemes like stock market, mutual funds, FDs, bonds etc. to get their share. When more than one person invests in a company or business, dividends are paid according to the investment ratio. The company pays dividends to shareholders who invest only when they make a profit. Dividends are paid in many ways. Let us understand what is Dividend.

What is a dividend?

A cash payment made by a company to its shareholders is called a dividend. If you invest in preferred stocks along with common stocks, you are entitled to receive dividends. You can choose to pay dividends when investing in company shares.

When you invest in common stock, the company pays a large amount in the form of dividends when the share price rises, while a predefined dividend is paid in preferred stock. In the case of selected stocks, dividend payments are often higher in the case of valid stocks or company bonds. Dividends paid to ordinary shareholders vary according to different companies. If there is a decline in share prices right now and there is a loss, the dividend payment also reduces the loss. It helps reduce volatility and portfolio risk.

Types of dividends

Dividends are determined based on the value per share. After the declaration of dividend, the company pays it on the due date. This date is called the due date. When a company makes a profit, it saves its profit and decides to distribute it to its shareholders. After the approval of the Board of Directors of the company, the shares are issued for payment on the due date, due date and record date. There are six types of dividends, which are as follows:

Cash dividend

Most companies pay this type of dividend. It is a cash payment that is sent directly from the company to the shareholder's account. Payment is usually made electronically, but sometimes payment can also be made by check.

Stock dividend

Stock dividends are paid to shareholders by issuing new shares. People who invest in common stocks may choose to pay a stock dividend. This dividend is considered more than a cash dividend. The company gives shareholders the option to convert the stock dividend into cash at will.

Asset dividend

Companies may also make non-financial payments in the form of dividends to shareholders in the form of physical assets, real estate and others.

Scrip dividend

When the company does not have sufficient funds to issue a dividend, the company may issue a scrip dividend, a type of promise that guarantees payment at a future date.

Liquidating dividend

When a company becomes a business, it pays its shareholders liquidating dividends. This is the final payment made to the shareholders by that company, this payment is made based on the number of shares.

Special dividend

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

How is the dividend calculated?

Dividends are always calculated based on the company's face value, not related to the company's current share prices. Let us know how dividends are calculated -

Suppose the current share price of Infosys is Rs 800 per share but its face value is Rs 10 per share.

If the company decides to pay 200% dividend to its investors in that year, then 200% dividend will be calculated on the basis of face value only, not on the current company's share price, i.e. 200% per share as per face value i.e. Rs. 20 per share.

Types of dividends over a period of time

In the stock market, the company declares dividends in two ways, interim dividends and final dividends.

Interim Dividends - When a company declares a quarterly dividend in a financial year, it is called an interim dividend.

Final Dividend - If the company declares a dividend at the end of the financial year, it is called a final dividend.

To which account does the dividend money go?

Dividend money comes into your account which is linked to your demat account. What is a demat account if you don't know?

Suppose I have a PNB savings account and that is linked to my demat account, then whenever the company decides to pay dividends, the dividend money will go directly to my PNB savings account.

Do all companies pay dividends in the stock market?

Giving dividends to a company depends on the board of directors of the company whether it wants to pay dividends or not, this director takes this decision in his annual general meeting (AGM) meeting.

It is not necessary that a company is big or makes a good profit, it will definitely not pay dividends otherwise the company which is late today will pay more dividends as I have already told you that the decision is taken by the board of directors

To buy shares in the stock market, first of all, you have to open a demat account. There are also two ways to open a demat account, the first way is to open a demat account with a broker and the second way is to open a demat account with a bank.

We keep our money in a bank account in the same way that our share money is kept in a demat account. If you do not have a demat account, you cannot start trading in the stock market.

Because after the company makes a profit, the money you get will go to your demat account, not to your bank account and the demat account is linked to your savings account, if you want, it is linked to your bank account from the demat account. You can then transfer the money.

To create a demat account, it is very important that you have a savings account in any bank and for proof, you need a copy of PAN card and proof of address.

Another way is to go to any bank and open your demat account.

But if you open your demat account with a broker, you will get good support and according to your investment, the broker will suggest you good companies in which you can invest your money. Brokers also charge a fee to do this.


What is support level?

Support, or support level, refers to the level of price that has the lowest decline in property prices in the following period.

The support level of any asset is created by buyers who enter the market even when the asset goes to a lower price.

How is the support level created?

Coming to the technical analysis, a line is drawn to chart a simple support level considering all the lowest levels of the asset during that period.

This support line is either flat or can be slanted down or down according to the overall spirit trend. Various other technical indicators and charting techniques are used to identify the support levels of the more advanced versions.

What is resistance level?

Resistance, or level of resistance, is a price point where the price increase of a property is hampered because suddenly many sellers want to sell their property at the same price.

Depending on the price action, the line of resistance is flat or slant. There are many advanced techniques for identifying resistance, including bands, trendlines and moving averages.

The difference between support level and resistance level

Support and Resistance In the stock chart, there are two different prices. Which is very important to know about.

Calculation of support level

Let us now know about the support price. The support price is the price point of the chart, from which the number of buyers is likely to be higher than the seller, and therefore the share price is likely to move above the support price point.

Resistance, on the other hand, is the price point of a price chart, from which buyers are more likely to be sellers, and thus, stock prices are likely to fall below the resistance price point.

Whenever price action breaks either of these two levels which is the support or resistance level, then this position is considered a trade opportunity.