What is Dividend? How to Earn Regular Income from Stocks in India
Dividends are cash payments companies share directly from their profits.
A dividend is a portion of a company's profits distributed to shareholders. When a company earns Rs.100 crore net profit and declares a Rs.30 crore dividend, it distributes Rs.30 crore to shareholders proportional to their holdings. The remaining Rs.70 crore is retained for business growth.
If you own 100 shares of ITC and the company declares Rs.15 per share dividend, you receive Rs.1,500 directly in your bank account. This is passive income from simply holding the stock. Many retirees build portfolios of dividend-paying stocks for regular income.
How are dividends declared and paid?
The board proposes dividend. Shareholders approve at AGM. Company sets record date. Only shareholders on record date receive dividend. Payment happens within 30 days after declaration.
Are dividends guaranteed?
No. Companies have no obligation to pay dividends. They can reduce, skip, or increase dividends based on profitability and cash needs. Only companies with consistent profits and strong cash flows maintain regular dividends.
Track dividend history of any stock on Stockk Equity. Build your dividend portfolio with a free demat account.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice. INDIRA SECURITIES PRIVATE LIMITED : SEBI REG. NO.: INZ000188930, NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG.NO.: IN-DP-90-2015, CIN:U67120MP1996PTC085111, RA SEBI REG. No.: INH000023269, IA SEBI REG No.: INA000021410. For any complaints pertaining to securities broking please write to [email protected], for DP related to [email protected].
Frequently Asked Questions
How are dividends taxed?
Dividends are added to your income and taxed at your income tax slab rate. TDS of 10% is deducted if annual dividend exceeds Rs.5,000 from a single company.
What is interim vs final dividend?
Interim dividend is declared mid-year by the board. Final dividend is proposed after year-end results and approved at AGM. Some companies pay both. Use StockkAsk at stockk.trade/stockkask to track dividend announcements.
Which Indian companies pay the highest dividends?
ITC, Coal India, Hindustan Zinc, Power Grid, and NTPC are known for high dividend payouts. PSU companies often have higher payout ratios due to government dividend requirements.
Should I prefer dividends or growth?
Depends on your stage. Young investors benefit more from reinvested growth. Retirees or income-seekers benefit from dividends. Dividends also signal management confidence in earnings sustainability.
What happens to stock price on ex-dividend date?
The stock price typically drops by approximately the dividend amount on ex-date. This is not a loss because the dividend compensates. Over time, the stock recovers if fundamentals are strong.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
INDIRA SECURITIES PRIVATE LIMITED : SEBI REG. NO.: INZ000188930, NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG.NO.: IN-DP-90-2015, CIN:U67120MP1996PTC085111, RA SEBI REG. No.: INH000023269, IA SEBI REG No.: INA000021410
