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  • Category: Mutual Funds

    How dividend in share market works?

    Want to know more about share market? Ever wondered how dividends are calculated? On this page check out the responses from experts and also know whether the dividends are calculated monthly or yearly.

    I saw HPCL have a 540 per share and have 6.30 dividend yield.if I invest for 100000, how much profit will they give me? Usually dividends are paid yearly or monthly.
    I have attached an image please explain me that.Is there any risk in investing like this
  • #149155
    The dividend is decided year to year basing on the performance of the company. It varies from year to year. During the board meeting, the company directors discuss the profits and the reinvestment plan. Basing on the outcome of the discussions they will decide what will be the percentage of dividend for a share on its face value(Not the Market value). This is will be once in a year and some companies if the profits are good they may announce an interim dividend and in the financial year end, they will decide the total dividend per the year and the remaining amount will be paid then. Higher the percentage of dividend higher the yield. We can't expect every year the same dividend and entirely depends on the performance of the company only. You can go for a company shares which are having good potential for growth and increase the share value rather than depending on the dividend. Of course, dividend will give you an idea about the performance of the company.
    always confident

  • #149166
    Dividend is declared as a percent on the face value of the share. For example if a share has a face value of Rs 100 and dividend is declared @20% then for every share held with you will get Rs 20/-
    Dividend Yield is calculated on the price you bought the share.
    So if you buy a 100 rupee face value share for 700 rupees from market and get a dividend @ 20 percent,
    Your actual dividend is Rs 20 per share.
    But dividend yield is 20/700 x 100 = 2.85 % only.

    In the present case, as in the displayed chart the face value of HPCL is not shown. But I gather that the FV of HPCL share is Rs10/-

    The dividend received per share (as per chart) is Rs 34.5. But the market price is 540.6. So yield is calculated as 34.5/540.6 x100=6.38. The dividend are given to all shares , but to the shareholder whose name recorded in the books of the company as on record date. Record dates are announced well in advance. During book closure period the company does not accept change of names even if the trade has happened. Usually the market price of the share increases and decreases after the book closure date.

    Usually dividends are declared and passed annually at the AGM. However some companies declare 'interim dividend ' when they are sure to be able to give a certain percentage of dividend and even surpass it later.

    Now in your case we cannot predict what will be the value of the share when you go for purchasing.
    Let us imagine the price is going to be 500 when you buy. So for Rs 100000/ you may get 200. You may have to pay the statutory dues and the charges separately. Now suppose subsequently after a few months, the dividend is declared @150% . You are still keeping the shares as on the record date.. Then as the FV of the share is Rs10, each share gets an amount of Rs15). As you have 200 shares you will get a dividend of Rs 3000. The yield is (15/500)X100 = 3%. ( It can be calculated as on your total investment Rs100000. i.e 3000/100000x100 =3%

  • #149167
    The dividend is distributed by the company to the shareholders as per their holdings. A company can give a dividend to the shareholders depending on its profit. If profit is not good it may skip the dividend also. Further, it can give dividend in parts also in a year like giving an interim dividend in between and then giving a final dividend afterwards.

    The dividend is given as a percentage on the face value. For example as the face value of HPCL share is Rs 10 and as it has given a current dividend of 34.5% then the value of dividend on 1 share will be Rs 3.45

    Please remember this is only a current dividend. There will be others also during the year like interim, current, final etc and we have to see the total dividend received in a year.

    Now if you have bought this share for Rs 540 (or whatever the market price) then the yield on your investment is total dividend received/ buy price. This will be a fraction. To convert it to percentage multiply it by 100 and you will get the dividend yield on your investment for the respective year.

    The dividend yield is a small benefit received by the shareholder from the company. The actual gain is when the share price rises significantly and you sell it in the market.

    Thoughts exchanged is knowledge gained.

  • #149181
    Dividend is a part of a profit that company has made in a yearly basis. Dividend is paid to all shareholders based on the amount of share they possess. Sometimes interim dividend is also given when company has made huge quarterly profit.
    There is no risk of investment in a company who provides the dividend.
    But simply do not invest in a company which is going to provide huge dividend. Sometimes big dividend is given in order to trap investors. When the ex-dividend date comes, the share price correct accordingly the amount given in dividend.
    Last year in march, I invested in Hindustan Zinc when it announced Rs 27 dividend per share. I immediately bought the shares and was very happy to be a part of shareholders who are going to receive this much of big dividend. But once the ex-dividend date came, it suddenly falls more than the dividend amount. In order not to lose money, I decided to hold the position in Hindustan Zinc for the time when it reaches my buying price. It is now a year and it has now managed to reach that price level when dividend was declared.

    Paresh B. Gujarati.
    Mechanical Engineer.
    'I'mprovement always begins with 'I'.

  • #149191
    A company which is making a profit can time to time declare dividends to its shareholders.

    The dividend is declared against a particular financial year and is reflected in its balance sheet.

    The dividend is declared as a percentage of face value of the shares. The face value can be generally Rs 1 or 2 or 5 or 10.

    So if a company is having face value of share as Rs 10 and declares 50% first interim dividend, 120% second interim dividend and 150% final dividend against a particular financial year then the total dividend on 1 share will be Rs 5 + 12 + 15 = Rs 32.

    Now if someone had purchased this share a few years back for Rs 600 ( for 1 share) then his yield for the said financial year will be (32/600)*100 = 5.4%

    The share of a company quotes in the market at a price depending on the performance of the company as well as other political and economic factors. An investor can sell his holdings in the market at favourable time to book the profits. The company can sometimes, in addition to dividend, announce right or bonus shares also to benefit its shareholders.

    Another thing is when dividend amounts are significant the share prices generally correct to the extent of dividends and to an investor it appears that gain through dividend is nullified by the decrease in share price in the market. This is a normal phenomenon and nothing to be worried as share price can again considerably go up for a good company.

    Knowledge is power.

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