To get good returns in the stock market, one should choose stocks that pay high dividends.
In recent years, the Indian markets have faced huge fluctuations. Although the stock price has not been much appreciated, many companies have given decent dividends to their investors. There are two advantages when investing in stocks that provide consistent dividends. Being the first to benefit from a share price appreciation. Second, there is a tax-free dividend. That being said, to get good returns, one must definitely go for stocks with high dividend records. There can be many doubts regarding dividends for new traders. First, let's dispel those doubts.
How to buy high dividend stocks for greater returns
Three types of profit usage A company can use its profits in the following three ways,
1: Entire profits can be used for business expansion, debt reduction or new acquisitions.
2: Or, a portion of the profit can be given as a dividend to the investors.
3: Or, the company may choose to carry out both of the above options.
The dividend is nothing but a share of the profit received by the company being distributed equally among the shareholders.
Sometimes, even though the company has incurred losses over a particular period, it may choose to reward its shareholders through dividends from its excess cash reserve. Also, it is not mandatory for the company to pay dividends every year. Dividends can be paid at the end of a financial year (known as an interim dividend) or at the end of a financial year (known as a final dividend).
SEBI Dividend Criteria
In general, dividends are declared as a fixed percentage. The dividend on the stock is paid on the basis of the face value of the stock. There is so much uncertainty here because the face value of companies varies widely. In addition, some companies are involved in practices such as continuously lowering the face value so that there is a large amount of stock on their shares or frequent stock splits.
So, SEBI has insisted that a company should declare clearly how much "dividend per share" is provided to shareholders.
Book closure dates
Each company listed on the index will announce "book closure" dates to verify investor information, to benefit from dividends, bonuses or preference shares and to decide the dates of the annual general meeting.
For example, if a company announces book closing dates from February 4 to February 11 to claim our profits, especially dividends, then we need to put the stock in our Demat account on or before February 3 Must be delivered.
Record dates
A company will announce a date to determine shareholders entitled to the benefits provided, specifically dividends. This date is known as the record date.
For example, if a company announces February 4 as the record date for providing an interim dividend to shareholders, then we must move the stock into a Demat account before February 4, to be eligible for dividend payment.
Predate
This date is determined by the stock exchange. For example, when Cummins India announced record date for interim dividend on February 15, 2014, NSE declared a pre-dividend date on February 13. This means that those who buy shares on or after the X-date are not entitled to dividends. In the same context, people who sell shares before ex-debt are also not eligible for dividends. The prior dividend date is usually 2 business dates before the record date. This is because the normal settlement takes T + 2 days. When the stock is traded on the pre-dividend date, the value usually falls to the extent of the dividend paid per share. The reason is that the amount of dividend paid is no longer a part of the company's funds.
Companies should inform NSE about the book closure dates, record date and applicable benefits seven days in advance. But it is enough to intimate about two days before the date of the board meeting, in which the dividend yield percentage will be determined. In the Cummins India example seen earlier, a board meeting was held on 4 February, at which a dividend was announced. Once, when Coal India declared an interim dividend of Rs. 29 per share, it was declared only 2 days before the pre-dividend date. Since there was a huge difference between the record date and the announcement date, the trade only took place on the estimate and ended trading if the stock was already declared a dividend at a higher price. Many investors feared a fall in the pre-dividend date and did not go for the stock. As expected, the pre-dividend date dropped drastically.
The basic reason for selecting shares on the basis of dividend
The selection of shares on the basis of dividend performance should be considered.
1. Companies that are widely popular and known by all.
2. Companies that have paid dividends continuously for the last 5 years.
3. Reasonable Dividend Yield
4. Unbiased Dividend Cover
dividend yield
If the share was Rs. 100 pays a dividend of Rs. 5, The percentage of return on the investment made is known as a dividend yield.
If the share price falls, the dividend yield will increase. If the dividend yield is too high, it indicates a problem with the company. This is because the share price declines only when the company is dealing with a lot of issues. In the Bombay Stock Exchange Index - BSE, the average dividend yield of a company ranges from 2 to 5 percent.
Dividend cover
Dividend cover is a parameter used to find out whether a company has provided a dividend out of current year profit or from continuing profit. It can be easily calculated in this way,
A value below 1 indicates a severe crisis in the company. When investing in shares is considered by considering the dividend return, it is necessary to note the current price of the share. If the price is too high or if it is near a 52-week high, it is better to wait for the stock to improve.
 |
| How To Invest In High Dividend Paying Stocks In India For Greater Returns |
In recent years, the Indian markets have faced huge fluctuations. Although the stock price has not been much appreciated, many companies have given decent dividends to their investors. There are two advantages when investing in stocks that provide consistent dividends. Being the first to benefit from a share price appreciation. Second, there is a tax-free dividend. That being said, to get good returns, one must definitely go for stocks with high dividend records. There can be many doubts regarding dividends for new traders. First, let's dispel those doubts.
How to buy high dividend stocks for greater returns
Three types of profit usage A company can use its profits in the following three ways,
1: Entire profits can be used for business expansion, debt reduction or new acquisitions.
2: Or, a portion of the profit can be given as a dividend to the investors.
3: Or, the company may choose to carry out both of the above options.
The dividend is nothing but a share of the profit received by the company being distributed equally among the shareholders.
Sometimes, even though the company has incurred losses over a particular period, it may choose to reward its shareholders through dividends from its excess cash reserve. Also, it is not mandatory for the company to pay dividends every year. Dividends can be paid at the end of a financial year (known as an interim dividend) or at the end of a financial year (known as a final dividend).
SEBI Dividend Criteria
In general, dividends are declared as a fixed percentage. The dividend on the stock is paid on the basis of the face value of the stock. There is so much uncertainty here because the face value of companies varies widely. In addition, some companies are involved in practices such as continuously lowering the face value so that there is a large amount of stock on their shares or frequent stock splits.
So, SEBI has insisted that a company should declare clearly how much "dividend per share" is provided to shareholders.
Book closure dates
Each company listed on the index will announce "book closure" dates to verify investor information, to benefit from dividends, bonuses or preference shares and to decide the dates of the annual general meeting.
For example, if a company announces book closing dates from February 4 to February 11 to claim our profits, especially dividends, then we need to put the stock in our Demat account on or before February 3 Must be delivered.
Record dates
A company will announce a date to determine shareholders entitled to the benefits provided, specifically dividends. This date is known as the record date.
For example, if a company announces February 4 as the record date for providing an interim dividend to shareholders, then we must move the stock into a Demat account before February 4, to be eligible for dividend payment.
Predate
This date is determined by the stock exchange. For example, when Cummins India announced record date for interim dividend on February 15, 2014, NSE declared a pre-dividend date on February 13. This means that those who buy shares on or after the X-date are not entitled to dividends. In the same context, people who sell shares before ex-debt are also not eligible for dividends. The prior dividend date is usually 2 business dates before the record date. This is because the normal settlement takes T + 2 days. When the stock is traded on the pre-dividend date, the value usually falls to the extent of the dividend paid per share. The reason is that the amount of dividend paid is no longer a part of the company's funds.
Companies should inform NSE about the book closure dates, record date and applicable benefits seven days in advance. But it is enough to intimate about two days before the date of the board meeting, in which the dividend yield percentage will be determined. In the Cummins India example seen earlier, a board meeting was held on 4 February, at which a dividend was announced. Once, when Coal India declared an interim dividend of Rs. 29 per share, it was declared only 2 days before the pre-dividend date. Since there was a huge difference between the record date and the announcement date, the trade only took place on the estimate and ended trading if the stock was already declared a dividend at a higher price. Many investors feared a fall in the pre-dividend date and did not go for the stock. As expected, the pre-dividend date dropped drastically.
The basic reason for selecting shares on the basis of dividend
The selection of shares on the basis of dividend performance should be considered.
1. Companies that are widely popular and known by all.
2. Companies that have paid dividends continuously for the last 5 years.
3. Reasonable Dividend Yield
4. Unbiased Dividend Cover
dividend yield
If the share was Rs. 100 pays a dividend of Rs. 5, The percentage of return on the investment made is known as a dividend yield.
If the share price falls, the dividend yield will increase. If the dividend yield is too high, it indicates a problem with the company. This is because the share price declines only when the company is dealing with a lot of issues. In the Bombay Stock Exchange Index - BSE, the average dividend yield of a company ranges from 2 to 5 percent.
Dividend cover
Dividend cover is a parameter used to find out whether a company has provided a dividend out of current year profit or from continuing profit. It can be easily calculated in this way,
A value below 1 indicates a severe crisis in the company. When investing in shares is considered by considering the dividend return, it is necessary to note the current price of the share. If the price is too high or if it is near a 52-week high, it is better to wait for the stock to improve.
0 Comments