Where the ₹5 goes

Watch the price and your cash.

A company's shares trade at **₹335**. It announces it will pay **₹5** to its shareholders for every share they own.

The ₹5 leaves the company and comes to you, so the share is worth about ₹5 less. You haven't gained ₹5 out of thin air.

What a dividend is

• Cash per share a share of the profits — A dividend is money a company pays its shareholders, a fixed amount **per share**. Own more shares, get more.
• Not guaranteed the company decides — A company doesn't have to pay one. It may keep the cash to grow instead, or pay from savings even in a loss year.
• Interim or final when it's paid — Paid during the financial year: **interim** dividend. Paid at the end of it: **final** dividend.

Dividends are sometimes quoted as a % of the share's **face value**: ₹5 on a ₹10 face value is "50%". That's not your return on the price you paid.

How much will you get?

Change the shares and the dividend.

**Remember:** dividend received = shares you own × dividend per share.

Example amounts. Taxes on dividends are left out.

Buy before the ex-date

Try each day.

The company checks its list of shareholders on the **record date**, here **Wednesday**. Shares settle one working day after you buy (T+1), so the **ex-date** is also Wednesday.

**Remember:** to get a dividend, buy **before** the ex-date. Buy on or after it and the dividend goes to the seller.

In India the ex-date is now usually the same day as the record date; a market holiday can separate them. Older guides, written for T+2, put it two days earlier.

Can you grab a quick dividend?

Why not buy the day before the ex-date, collect the dividend and sell?

• Buy on Tuesday the day before the ex-date — You pay **₹335**. On Wednesday the share is worth about **₹330**, plus your **₹5** dividend: ₹335 in total.
• Buy on Wednesday the ex-date — You pay about **₹330** and get no dividend. You own a share worth about **₹330**.

**Remember:** on the ex-date the price usually falls by about the dividend, so there's no free money. Other news can move the price too.

Check — Question 4 of 4

Who gets the dividend? Ex-date: Wednesday.

What you now know

• A dividend is cash paid per share; total = shares × dividend per share.
• Companies don't have to pay dividends.
• To get one, you must buy before the ex-date.
• In India the ex-date is now usually the same day as the record date.
• On the ex-date the price usually drops by about the dividend, so it isn't free money.