Cash Dividends

Dividends are payment paid by the company to its share holders from the profit it earned in that quarter. It is paid as a portion of the profit. Usually dividends are paid in form of cash know as cash dividends. It is not the same in all the case; however it is paid in form of cash in most of the case. When a company earns a profit it can be used up in two ways. It can be either given as dividends or can be used for future expansion purpose. The paying of the dividend need not be same by all the companies. For ex. The joint stock companies pay fixed dividends at regular interval, whereas public companies pays dividend based on their income but not on a regular basis. They pay dividend on a special occasion which is called as special dividend.  Cash dividends will be usually in the form of E-fund or cheques. These funds are subjected to tax for the investors. The dividends are usually announced for each shares and the investor earns money based on the number of shares he/she holds.

The dividends are usually declared by the board of directors. The investors must know the following dates to earn dividends from the company they are,

• Declaration date is the date on which the board of directors announces to its investors their intention to give away the dividend. In this date the company adds upon the fund allocated as dividend into the liability part on its book.
• The in-dividend date is the last trading day on which when a shareholder holding the shares will get the dividend. For ex if the shareholder sells the dividend on this day then he will be loosing the right to claim dividend and if some shareholder buys the share on this day he will be gaining the right to claim dividend.
• The ex-dividend dates are the days right after the in-dividend date until the dividend is paid by the company. During these days the trading of the company shares got no impact on the person who is eligible to get the dividend.
• The payment date is the date on which the company actually pays the dividend to its investors.

Question

• What is a dividend?
• What are some of the important dates in the case of dividend payment process?