New Delhi – Stock market investors often focus on dividends as a key aspect of their investment strategy. Dividends are essentially a reward that companies distribute to their shareholders, though they are not guaranteed every year. Still, many investors aim to capitalize on them.
Occasionally, investors talk about profiting from dividends, raising the question: how can dividends offer double benefits to investors?
What is a Dividend?
A dividend is a portion of a company’s profit given to shareholders. It can come in the form of cash, shares, or other assets. The company decides the amount and the date on which the dividend will be credited to shareholders’ accounts.
For instance, on September 6, NBCC India shareholders received a dividend. Although the company had announced this earlier, the specific date for the dividend credit was determined later. On the day the dividend is credited, the company’s shares trade on an ex-dividend basis.
How Does Dividend Offer Double Benefits?
Dividends can provide not just one, but two benefits to investors. Here’s how it works:
Imagine you own 5,000 shares of a company and have invested Rs 20 lakh (Rs 400 per share). After holding the shares for a year, the stock gave you an 18% return, resulting in a profit of Rs 3,60,000.
Now, the company declares a dividend of Rs 12 per share. With 5,000 shares, you receive Rs 60,000 in dividends. This means that while you earned Rs 3,60,000 from the stock’s returns, you also gained Rs 60,000 from dividends, effectively doubling your benefit.
