Dividend
Part of a company's profit paid out in cash to shareholders, announced as rupees per share. The board decides it each time; it is never promised.
A profitable company can keep its profit to grow the business, or pay some of it to the owners. The payment is a dividend. Plenty of fast-growing companies pay little or nothing, and that is not a bad sign on its own.
To receive a dividend you must own the share on the record date the company announces. With India’s next-day settlement, buying on the record date itself is too late: you need to have bought by the trading day before.
Dividends are added to your income and taxed at your slab rate. Once a company’s dividends to you cross 10,000 rupees in a year, it deducts 10 percent tax before paying.
Example
A company declares 12 rupees per share and you own 250 shares. A few weeks later 3,000 rupees arrive in your bank account.
Watch out
On the day a share stops carrying the dividend, its price usually drops by about the dividend amount. A dividend moves money from the company’s account to yours. It is not a free extra.
Learn it properly in
Chapter 1.1: What a share actually is, and what you own when you buy one