What is a Dividend?

Dividend is a corporate action wherein a payment is made to shareholders of a company from a portion of its profits. It is a reward to shareholders in proportion to their holdings for investing in the company's equity. It is however, not obligatory for a company to issue a dividend.   You will be eligible to receive dividends if you have purchased shares of the concerned company on or before the ex-date (for it to be settled in your demat account by the record date).

If you purchase the shares on or after the ex-date, you will not be eligible for the dividend since the shares will not be in your name as per company records on the record date.

Important Dates during a Dividend Issue:
For example, Reliance Industries concludes their Annual General Meeting (AGM) on 15th July. A dividend issue at Rs. 10 per share is approved by the Board of Directors and related dates are announced.

Declaration Date: 15th July The day the dividend issue is announced to the public.
Ex-Date: 18th August
To be eligible to receive dividends, purchases must be made on or before 17th August. 
Investors who purchase shares on or after the ex-date will not be eligible to receive dividends.
From the dividend declaration date to the ex-date, the shares are said to be trading cum dividend (with dividend).
Record Date: 18th August
All shareholders of Reliance Industries as per company records on 18th August will receive the dividend payout.
Payout Date
They day when the dividend is issued to eligible shareholders. This may be 10-15 days after the record date.

Since we have shifted to the T+1 settlement cycle, the ex-date and record date for corporate actions fall on the same day.

Final Dividends are declared by the Board of Directors after the financial statements for the financial year are published and approved at the Annual General Meeting (AGM).

Interim Dividends are paid before the AGM and release of final financial reports for the financial year.

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