Once upon a time, the richest man in the world, John D. Rockefeller, said that the only thing that truly made him happy was seeing his dividends coming in. Even today, dividends remain an important source of income for investors. For example, Warren Buffett earns millions of dollars every year from dividends alone.
But what exactly are dividends?
Which companies give dividends?
What Are Dividends?
When you buy a share of a company, you can earn money in two main ways:
1. By selling the share at a higher price than you bought it
2. By receiving dividends
Dividends are called “Labhans” in Hindi.
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Labh means profit
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Ans means part
So, dividends simply mean a part of the company’s profit that is shared with shareholders.
How Do Dividends Work?
Every profitable company has two choices:
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Use all profits to grow its business
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Or share a part of its profits with shareholders and invest the rest in the business
The portion of profit that is shared with shareholders is called a dividend.
Dividend Example (Simple Explanation)
Let’s understand this with an example.
Assume:
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XYZ company earns a profit of $12 million
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The company decides to give a dividend of $0.06 per share
If you own 1,000 shares of XYZ company in your demat account, then:
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Dividend received = 1,000 × $0.06
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You will receive $60 as dividend
This amount is directly credited to your account.
Which Companies Give Dividends?
Not all companies give dividends. Usually:
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❌ Loss-making companies do not give dividends
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✅ Profitable and mature companies give dividends
Why new companies don’t give dividends?
New or growing companies prefer to:
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Reinvest profits into business expansion
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Increase future profits
This benefits investors in two ways:
1. Share price increases over time
2. Future dividends may be higher
Who Decides Dividend Payments?
The decision to give dividends is made by the company’s board of directors.
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If they feel profits can grow the business → no dividend
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If expansion is limited → profit is shared as dividend
So, dividend payment is not guaranteed, even for profitable companies.
How Can You Get Dividends?
To earn dividends, you must:
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Buy shares of profitable, dividend-paying companies
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Hold those shares at the right time
You can find dividend-paying companies through:
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Stock market websites
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Company annual reports
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Financial portals
Important Dividend Dates You Must Know
To receive dividends, these two dates are very important:
1. Record Date
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Your name must be in the company’s shareholder list on this date
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If your name is not recorded, you won’t receive dividends
2. Ex-Dividend Date
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Usually one day before the record date
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You must buy shares before the ex-dividend date
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Buying on or after this date means no dividend
Companies announce these dates publicly every time they declare dividends.
How Often Are Dividends Paid?
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Some companies pay dividends once a year
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Others pay quarterly or multiple times a year
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Each time, new record and ex-dividend dates are announced
