What's your dividend yield?

What's your dividend yield?

The dividend yield represents your income as a percentage of the investment. This is similar to the interest earned on money deposited in a bank. This figure will help you compare the returns on your investments.

If you purchase 1,000 shares of a company when the stock price is Rs. 20, your total investment would be Rs. 20,000.

If the company declares a dividend of 15% (on a face value of Rs 10), you would get Rs 1.50 per share. The dividend yield is calculated by the following formula:

Dividend yield (Rs 1.50)/Share price (Rs 20)x100 = Dividend Yield (7.5%)

In other words, the stock is paying you 7.5% on your investment by way of dividend every year.

If another company also paid Rs 1.50 per share, but its stock price was Rs 30, the dividend yield would come down to 5%. This is because you would have to invest Rs 30,000 to buy 1,000 shares that would earn you a dividend of Rs 1,500.

If the price of the shares you bought at Rs 20 each comes down to Rs 15 and the company maintains the dividend payout at 15% , the dividend yield would shoot up to 10%.

DATES TO REMEMBER

• Dividend declaration date: The date on which the board of directors announces the dividend to be paid to shareholders.
• Record date: Cut-off date for eligibility for the dividend. You should be holding the shares in your account to be eligible.
• Ex-dividend date: The date when the shares is traded minus the dividend. If you buy on or after this date, you don't get it.
• Dividend payable date: When the company mails dividend cheques or transfers money to the shareholders' accounts.

Source: www.wealth.economictimes.com

Thanks,

Gaurav Agarwal

Head Dealer

DENIP Consultants Pvt Ltd