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Definition: Dividend

It is a mode of distribution of a Company's profit. It is a return from the profits of the company to the shareholders who have invested in the shares of the company. In case of debt instruments, interest has to be paid even in case of loss but dividends can not be paid if a company incurs loss that year.

It is on the discretion of the Board of Directors and the subsequent approval of shareholders, that the dividends can be declared in the AGM. For Indian Companies, this dividend has to be paid to the shareholders within 7 days. The dividend paid is not treated as a *TAXABLE-EXPENSE* but as an appropriation of profits.

The dividend can be paid in various forms such as:-

  • Cash
  • Shares/Stock
  • Kind
  • Buy back of shares
  • Discount coupons etc.

If the company has expansion/cap-ex plans, then it re-invests the profits into the business and doesn't pay dividends in spite of having considerable profits.


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