What is dividend?
A dividend is a financial distribution of a company's earnings to its shareholders. Earnings are typically paid out quarterly, and shareholders must be on the company's books to receive them. Dividends can be either in cash or in stock and are usually paid out of the company's retained earnings.
How do dividends work?
Dividends are a form of income paid out by some companies to their shareholders. To become eligible for dividends, an individual must purchase stock in the company or own shares through other investments such as mutual funds. The eligibility for dividends is determined by the issuing company, and there are often rules in place about how many shares one must own to begin receiving annual or quarterly dividend payments.
In India, tax applies to dividends that exceed Rs. 5,000 per annum. Dividends are the money paid to shareholders as a return on their investment in the company. Companies make these payments after they have made sure that all expenses and tax bills are taken care of, and usually out of profits.
Why do companies issue dividends?
Companies issue dividends for a variety of reasons, but the two most common reasons are to attract investors and retain existing shareholders. By issuing dividends, companies can signal to potential investors that they are profitable and have a good track record of returning earnings to shareholders. For existing shareholders, dividends provide a way to receive a return on their investment without having to sell their shares. Therefore, dividend payments can help companies to attract new investors and keep existing shareholders happy.