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WHAT IS DIVIDEND AND DIVIDEND YIELD?


Dividends and dividend yield are important concepts in the context of investing in stocks in India, as they are worldwide. Let's understand what they mean and how they apply in India.

Dividends:

Dividends are payments provided to shareholders from a company's earnings. Companies may choose to distribute dividends as cash or additional shares of stock. Dividends are typically paid out periodically, such as quarterly or annually, and are usually declared by the company's board of directors.

In India, dividends are subject to dividend distribution tax (DDT), which is a tax imposed on companies that distribute dividends. However, starting from the financial year 2020-2021, the Finance Act 2020 abolished DDT, and instead, dividends became taxable in the hands of the recipients (shareholders) based on their respective tax brackets. This means that shareholders are now responsible for paying taxes on dividends received, depending on their income tax slab rates.

Dividend Yield:

Dividend yield is a financial ratio that indicates the annual dividend income earned from an investment relative to its market price. It is determined by dividing the yearly dividend per share by the share's market price, and it is reported as a percentage.

 

The dividend yield formula is as follows:

Dividend Yield = (Annual Dividend per Share / Market Price per Share) x 100

 

In India, dividend yield is an important metric for investors to evaluate the income potential of a stock. Higher dividend yields indicate higher income potential, but it's important to consider other factors such as the company's financial health, dividend sustainability, and future growth prospects before making investment decisions solely based on dividend yield.

It's worth noting that dividend policies and practices can vary among Indian companies. While some companies may have a consistent track record of paying dividends, others may not distribute dividends or may do so irregularly. Additionally, the amount of dividends and dividend yield can fluctuate based on a company's financial performance and profitability.

As an investor, it's important to conduct thorough research and analysis of individual companies before making investment decisions based on dividends or dividend yield. It's also recommended to consult with a financial advisor or professional for personalized guidance regarding investment strategies and considerations.

Fortunity Academy is a Share Market Classes and Trading Training Institute located at Dadar, Mumbai. Students learn how to analyze financial accounts, assess business fundamentals, and spot prospective investment possibilities in stock market classes or stock market courses. We are also learning how to read stock charts, spot market trends, and use technical indicators to decide what to trade. To assist students in protecting their investment, risk management strategies are also emphasised. These include stop-loss orders and adjusting position sizes. When it comes to stock market investment, we can offer advice and knowledge.

 www.fortunityacademy.in

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