What Is Dividend?
The portrait of Mahatma Gandhi is displayed on an Indian 2,000 rupee banknote. (Photographer: Brent Lewin/Bloomberg)

What Is Dividend?

This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.

Dividend: Definition, Meaning & Basics

Dividend is sharing of profit of a company with its shareholders.

A shareholder, typically, gets two types of return from investment into shares: capital appreciation and dividend. In normal course of operations, a company may make profit after adjusting revenue for all types of expenses—such as operating expenses, interest and tax payment from its income. Profit available after adjusting expenses to income, is used for distribution with shareholders.

Companies usually share a part of their profit with shareholders in the form of dividend which is paid on a per share basis. For instance, a company may decide to pay Rs 5 per share and if a shareholder holds 100 shares, he will end up receiving Rs 500.

Dividend payout ratio is the total dividend paid expressed as a percentage of net profit.

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