Understand Dividend and Dividend Yield Terms

DIVIDEND AND DIVIDEND YIELD

Introduction :
In this topic we are going to discuss, understand and learn about Dividend and Dividend Yield.
This is very simple and interesting topic to understand.

Let's talk about Dividend and understand it :
Dividend simply can be understand as some amount of money shared with the shareholder from the Net Profit amount.
For example :
Company A have one thousand out standing shares. And Company A Net Profit is Rs.100000 and Company A wants to give Rs.50000 as dividend and retain Rs.50000 in reserves.
Then Dividend received = Rs.50000/1000 = Rs.50/share.

Dividend given is not a expense it is the portion of Net Profit.
This dividend can be reinvested to purchase more shares.
Generally Healthy well established and stable companies give Dividend.
Ideally 30% to 50% of Net Profit dividend giving companies are well established and are pioneer in their sector or leader in their sector.

Generally dividend declared percentage is related to Face Value.
Suppose Dividend declared is 100% and Face value of stock is Rs.1, then the dividend received by one share is Rs.1,
Dividend declared is 50% and Face value of stock is Rs.1, then the dividend received by one share is Rs.0.5,
Dividend declared is 10% and Face value of stock is Rs.10, then the dividend received by one share is Rs.1,
Dividend declared is 50% and Face value of stock is Rs.10, then the dividend received by one share is Rs.5,

Let's understand Dividend Yield :
Dividend Yield is calculated in percentage.
Dividend Yield can be understand as the ratio of Dividend received per share to the Current Market Price of Stock.
For example :
Company A given dividend of Rs.50 / share and current market price of share is Rs.1000 / share,
then Dividend Yield = Rs.50 / Rs.1000 *100 = 5%.
Ideally 5% to 7% is good dividend yield rate.

Hope Friend now Dividend and Dividend Yield is clear to you.

Disclaimer - This article is only for knowledge and information share and not for any type of recommendation.