What is a dividend?
A dividend is a share of a company’s profit paid out to shareholders — usually cash, per share. One of the two ways stocks make you money.
A dividend is a portion of a company’s profit that it distributes to its shareholders, usually in cash and quoted as an amount per share. If you own 100 shares and the company declares a ₹5 dividend, you receive ₹500 — simply for holding the stock.
Not every company pays dividends. Mature, profitable, cash-generating businesses (think large FMCG, banks, PSUs) tend to pay steady dividends. Fast-growing companies often pay little or nothing, choosing to reinvest profits to grow faster — which can reward you through a rising share price instead.
Key dates matter: the "record date" decides who qualifies, and the "ex-dividend date" is when the stock starts trading without the upcoming dividend (the price typically drops by roughly the dividend amount). A dividend is real income, but a high dividend is not automatically good — check that the company can afford it from genuine profits.
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Common questions
Do I have to pay tax on dividends in India?
Yes — since FY2020-21 dividends are taxed in the investor’s hands at your income-tax slab rate, and TDS may apply above a threshold. Factor this into the real yield.
Does the share price fall after a dividend?
Typically the price drops by about the dividend amount on the ex-dividend date, because that cash has left the company. You gain the dividend but the share is worth a little less — it nets out on day one.