New Delhi- Dividend Benefit: Stock market investors keep an eye on dividends. However, dividend is a kind of reward which the company gives sometimes. This means that it is not certain that dividend will be received every year, but still the focus of investors remains on dividends.
Many times investors also say that there has been a profit from dividend. In such a situation, the question arises that how investors are getting double benefit from dividend.
What is dividend?
When the company is in profit, it gives dividend to its shareholders. This dividend can be in cash, shares or in other form. One thing is understood from this that investors benefit from dividend. How much dividend will the shareholders get and on which day this dividend will come in the shareholders’ account is decided by the company.
For example, on September 6, shareholders of NBCC India received a dividend. Although the company had already announced the dividend, the company decided on which day the dividend would be credited to the shareholders’ account. On the day of the trading session in which the dividend is credited to the investors’ account, the company’s shares trade on ex-dividend.
How does dividend give double benefit?
Dividend does not give investors one benefit but double benefit. Understand it like this, if you have 5000 shares of a company and you have invested Rs 20 lakh for 5,000 shares, i.e. Rs 400 per share. You have had this share for 1 year and in 1 year the share gave a return of 18 percent. This means that you got a profit of Rs 3,60,000 through returns.
Now the company is giving a dividend of Rs 12 on every share. If you had 5,000 shares, you would get a dividend of Rs 60,000. On one hand, you got a profit of Rs 3,60,000 from returns and on the other hand, you got a profit of Rs 60,000 through dividend. In this way, you got double benefit through dividend.