A dividend is a payment made by a company to its shareholders from earnings. Management can choose to reinvest profits to grow the business or pay dividends. Dividends are most commonly paid as cash deposits in shareholders' accounts. Companies often pay dividends quarterly but some pay semi-annually or annually, and they are not obligated to pay dividends. To receive a dividend, investors must purchase shares before the ex-dividend date, which is typically a couple days before the record date. Dividend yield measures the percentage return from dividends and allows comparison between dividend stocks and bonds.

1. What Is A Dividend & How To Get It?
A Dividend is a payment that the shareholders receive from a company’s earnings.
When a company is profitable, management can choose to reinvest profits to help grow
the business or distribute those profits to shareholders in the form of dividends.
Dividends come in several forms, but the most common is cash, which is deposited into
shareholders’ investment accounts. For example, if a company declares a $0.30
dividend and you own 100 shares, you’ll receive $30. Typically, mature companies with
strong cash flows are more likely to pay dividends.
How Does Dividend work

2. Many investors seek the income associated with Dividends and often view them as a
sign of strength and positive expectations for future earnings. Companies often pay
dividends quarterly; however, some pay semi-annually or annually. Keep in mind, that
companies aren’t obligated to pay a dividend and can reduce or stop paying it at any
time.
You should also be aware that simply owning stock on the day its dividend is paid
doesn’t necessarily mean you’ll receive the dividend. You must be a shareholder earlier,
on what’s called the Record date. Because stock transactions take a few days to clear,
and to ensure the accurate allocation of dividends, there is a cut-off prior to the record
date called the ex-dividend date.
Those who buy the stock on or after the ex-dividend date are not eligible to receive the
upcoming dividend. The important thing to remember is that you typically need to
purchase a stock at least a couple of days before the record date to officially own it in
time to be eligible to receive the dividend.
The number of days between the record date and the day the dividend is paid varies
from company to company but is often between one and six weeks. Instead of receiving
dividends as cash, you can also opt for an automatic dividend reinvestment plan, or
DRIP, for eligible securities. With a DRIP, dividends are automatically used to purchase
additional shares. This allows investors to accumulate more shares over time and can
potentially compound returns but also increases portfolio risk. Some investors
specifically seek out and invest in dividend-paying stocks. Dividend stocks can provide
income and potentially enhance a portfolio’s overall returns.
Investors can measure the percentage return from dividend income using Dividend
yield.
Dividend Yield

3. Yield is the percent return of an asset paid over one year. For dividend stocks, the yield
is the sum of the last four quarterly dividends divided by the price of the stock multiplied
by 100. Let’s look at an example. Say there’s a $30 stock that over the past four quarters
paid dividends of $0.20, $0.20, $0.20, and $0.18, totaling $0.78 per share. This means
the stock has a dividend yield of 2.6%.
Dividend yield essentially tells you how much return you’re getting for the price of the
stock. It also allows you to compare the dividends of stocks with different prices, as
well as other interest-bearing securities, like bonds or CDs. For example, if investors
were faced with the decision to purchase a bond yielding 1.5% or a stock with a dividend
yield of 2.6%, they may potentially choose the latter.

4. In addition to potentially higher yield, many investors look for consistent and growing
dividends over time as an indication of company health and the likelihood of paying
future dividends. Although dividend stocks have many benefits, they do have some
unique risks. Because they’re often considered an alternative to interest-paying
securities,
Dividend stocks are vulnerable to changes in interest rates. In a rising rate environment,
investors might sell dividend stocks and shift money into other securities yielding a
higher return. It’s also important to remember that dividends aren’t guaranteed.
Companies that pay unusually high dividends may not be able to sustain them, and if
dividends are cut, it might send the stock price tumbling. Despite these risks,
dividend-paying stocks tend to provide income while still allowing for the potential of
stock price appreciation.
Important Dates to Get Guaranteed Dividend
Whenever you hear a company declaring a dividend, there are many dates linked to
them.
Dividend Declaration Date
The first date is the Dividend Declaration Date, the board of directors announces the
dividend with its amount. Other than this there are two dates naming record date and
payment date and the company announces these dates simultaneously.
Record Date
The record date is the date on which the investors should be in the records of the
company’s shareholders if they want a dividend means that if the record date is 5th

5. March and on this day a particular person is in the list of the company’s shareholders,
he will get the dividend but here comes a problem, whenever you buy a share you
receive it after T+2 days meaning you have to wait for 2 trading days to receive it.
Ex-Dividend Date
The Ex-Dividend Date is the date that is set two days prior to the record date. So, if an
investor wants the dividend, they need to purchase the shares before the ex-dividend
date so that on the record date, the name of the investor is on the list.
Dividend Payment Date
The fourth date is the dividend payment date and on this date, the dividend is paid to the
shareholders whenever a company declares a dividend, they tell you if it’s interim or
final.
The interim dividend is the one that is announced during the financial year This dividend
can be taken back with the consent of the shareholders.
The final dividend is the one that is given out after the closing of the financial year and is
announced at the company’s annual general meeting. By this time, the year-end
financials of the company are prepared and they cannot be taken back.

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