Can Dividend make you rich?, let’s understand the strategies to build an long term wealth…

Can Dividend make you rich?, let’s understand the strategies to build an long term wealth…


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What is the dividend?

To understand what is dividend, we need to look into company’s earnings, basically an dividend is part of the company profit or income earned during the financial quarter and analyzed. When an company make good profit or see’s revenue growth, company pay some of its profit to its shareholders in the form of dividends.

Based on company Board meeting and financial statements company decide on either to pay dividends or reinvest the profit money to make the growth of the company higher. The dividends are paid either monthly or monthly or quarterly or yearly basis.

How many types of dividends are there?

There are almost Cash Dividend, Stock Dividend, Property Dividend and some more.

Cash Dividend:

Cash Dividend is the dividend paid to the shareholder from the part of company’s profit to eligible shareholder on the ex-date of the shares. It paid via cheque or electronically to shareholder bank account within 30 days of the ex-date for dividend planned by the company.

Lets see this by an example, if an company xyz declares cash dividend of Rs 25 per share, and an individual held or holds 1000 shares of the xyz company on the ex-date planned by the company, the shareholder would be eligible to receive the dividend cash payout. Now the dividend the individual investor would getting is 1000×25 = Rs 25000. The dividend is decided by the company board members based on the performance of the company and its share value.

Stock Dividend:

Stock Dividend is type of dividend paid in the form of Stock or shares additionally given to its shareholders. This helps companies to reserve the cash and rewards their shareholders too.

Property Dividend:

Property Dividend is the type of property dividend which provide certain assets to its shareholders. The assets can be like property, sub asset of the company and more…

Lets See how dividend can make an Individual Rich?

Lets first understand what kind of companies provide dividend to its shareholders. Usually the large cap companies like TCS, HCL, Infosys, Tech Mahindra, ICICI bank, HDFC bank and more Provide good dividend to its shareholders.

To make an good dividend income an individual need to hold more quantity of the of the shares of the company.

Example:

In January 2024 TCS declared two types of divided on the same ex date, one was interim dividend of Rs 9 per share which 900% of the dividend based on the share value of the company and other one is special dividend of Rs 18 per share for its eligible shareholders on the date of ex date.

The total dividend amount per share is Rs 27. Now if an individual has an 100 shares of the TCS on the record date or ex-date planned by the company. The individual would be getting an 100×27 = Rs 2700 as dividend payout from the TCS.

The same individual reinvest the dividend money and bring an shares of mid cap company at Rs 100 where he gets an 27 shares of the xyz mid cap company.

In the nest quarter TCS again decide to pay interim dividend of Rs 10 per share to its share holders and at the same time the xyz company also decides to pay the dividend of Rs 15 per share to its share holders.

Now the Individual earns from dividend is TCS 100×10 = Rs 1000 and xyz company 27×15 = Rs 405 and the total income is 1405. At this time market crashes and individual investor is smart investor who has an eye on good dividend paying stock, he grabs the chance and add more 100 shares of the TCS and 250 shares of mid cap dividend paying company and 150 shares of the HCL Tech.

Now by the end of the year an individual has increased quantity and also bought more good dividend paying stocks like TCS and HCL Tech  pays almost four times in a year, now the individual investor has more income regularly by diversifying the portfolio and power of reinvesting and grabbing right to invest in the market.

Disclaimers: Thinkota provides stock market updates for informational and educational purposes only and should not be considered as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions. Thinkota.com is not liable or responsible for any losses incurred by the reader. Investments in stocks markets and mutual funds are subject to market risk, make your analysis before investing and We advise investors to check with certified experts before making any investment decisions. The above is just used for an example and educational purpose only. The date and events are just for providing the idea to reader.


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RakeshRocky
RakeshRocky
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