Understanding Dividends: How They Are Paid Without Considering Share Price

Do We Get Dividends on Shares Irrespective of the Share Price?

Yes, you will receive dividends based on the number of shares you hold, regardless of the share price. The dividend payment is linked to the face value of the share and the declared dividend rate by the company, not the current market price.

How Dividends Are Calculated

Dividends are paid as a percentage of the face value of the share, which is a fixed amount. This ensures that the dividend payout is consistent regardless of fluctuations in the share price. For instance, if a stock is trading at Rs. 132, but its face value is Rs. 100 and the rate of dividend is 10%, the dividend per share would be Rs. 10. This amount is taken from the company's profits and distributed to shareholders.

Examples of Dividend Calculation

Let's consider an example: if a stock is currently trading at Rs. 132 but its face value is Rs. 100 and the company declares a dividend of 10%, the dividend per share is calculated as follows:

Dividend 10% of Rs. 100 Rs. 10

This means that every shareholder of the company will receive Rs. 10 per share, irrespective of the current share price.

Factors Influencing Dividend Payment

Dividends are paid out of the company's profits, and the board of directors decides whether to declare a dividend and at what rate. The dividend is not linked to the share price but is determined based on the company's earnings.

Traders can check the upcoming dividend dates and details using various financial apps and websites such as MoneyControl and the BSE (Bombay Stock Exchange). By visiting Econamoc’s time’s upcoming dividend page, one can stay informed about dividends.

Bottom Line and Important Considerations

The key takeaway is that dividends are paid based on the number of shares you own and the dividend rate declared by the company, not the share price. Whether you bought the shares at a high price or a lower price does not affect the dividend you receive. If the company decides to announce a dividend, it will be distributed according to the shares held by each shareholder.

For instance, if a company announces a dividend of 10.15 per share, and you own 50 shares, you would receive Rs. 507.5 in dividends. The more shares you own, the higher the dividend amount you receive.

Understanding this helps investors focus on the long-term performance of the company, rather than short-term fluctuations in share price, to maximize their returns through dividends.