What is Dividend and How to Get It?
What is a Dividend?
A dividend is a small profit-sharing note from a company to its shareholders. It's a portion of the company's profits that the company decides to share with the people who own their stock or company shares.
Types of Dividends
Cash Dividends: The most common type. It's like getting an amount from the company to the shareholder's bank account after deducting 10% TDS.
Stock Dividends: Instead of cash, you get more shares of the company.
Property Dividends: Rarely, a company might give out actual products or assets of the company.
How Dividends Work
When a company makes profits, they have a choice: reinvest it all back into the business or share some with their stockholders. If they choose to share, that's when dividends come into play.
Not all companies pay dividends. Some, like many tech startups, prefer to reinvest all their profits to grow faster.
How to Get Dividends?
Buy Dividend-Paying Stocks:-
The first step to getting dividends is to take ownership of the stocks that pay them. Look for established companies that have a history of paying dividends like IOC, BPCL, and COAL INDIA.
Hold Stocks Past the Ex-Dividend Date:-
This is the cut-off date for dividend eligibility. If you buy a stock after this date, you'll have to wait for the next dividend payment with dividend EX-DATE.
Reinvest Your Dividends:-
Many companies offer dividend reinvestment plans (DRIPs). Instead of getting cash, you can automatically use your dividends to buy more shares.
What are the benefits of Dividend Investing?
Regular Income: It's like getting a small bonus every quarter or so.
Compound Growth: If you reinvest, your investment can grow faster over time.
Lower Risk: Companies that pay dividends are often more stable.
What are the Risks?
Dividend Cuts: Companies can reduce or stop dividends if they're struggling.
Tax Implications: You might need to pay taxes (10%) on your dividend income.
