Dividend Income Guide

Dividend Income Guide and how to calculate dividends

Dividends are usually paid quarterly (in some cases semi-yearly) or annually in installments made by the company to their shareholders as a method for sharing net profits. Some dividends you receive are in certain paisa per share, others pay numerous rupees per share. It means dividend amount is not fixed and vary from stock to stock or quarter to quarter.

The Relative Nature of Dividends

Why do a few organizations pay more than others? It depends to a great extent on their industry specialty, their need to pull in new venture capital, and the aggressive scene with a given condition of the economy.

Also, they are the essential value determinant for a few stocks in the market as a rule. Raise the profit, and the cost in the market will run up to relate with the going rate of return for organizations at that level.

Profits are never guaranteed, they rely upon profits since they are benefits being shared among the proprietors of the company (the Shareholders). We generally, as an Investor look to buy High dividend companies. (When I refer to an organization paying a high dividend I mean the dividend paid in the percentage of the stock’s value, instead of the measure of cash included.)

How to Calculate dividends

Ever been baffled by the headlines in the newspaper which says something like this ” 1800% dividend declared by the XYZ company ” or ” ABC company rewards its shareholders by 500% dividend”. For a newbie or anyone doesn’t understand the calculations is shocking as well as confusing, To clear your confusion the calculations have to be understood. I won’t be explaining most of the terms (You can google 😀  ).

Snapshot 1 shows the data required in the calculation of a dividend. You can use this format to calculate your dividend income. Or you can use the Online Dividend income Calculator below.

Dividend income of some stocks
Snapshot 1

Dividend Online calculation:

You can Calculate how much dividend you have received from the online calculator attached below. Just enter the correct information in the Yellow fields and you will get your answers under the Blue fields automatically.

Why should I buy high dividend shares?

  • Investing in High dividend stocks has few benefits. Rather than depending on price appreciation in the stock price to do the job for you. You can make additional income via dividends. The company does pay dividends to whoever owns their shares, which means they can maintain their stock’s inherent value in the marketplace through a consistent and generous dividend payout strategy.
  • Another benefit is that Income from dividends from the Indian companies is tax-free. Yes, tax-free income is a reality by means of a dividend income.
  • You can also use dividend Investment strategy to get better returns from the bank. You can put your money in the bank at 3%, or you can invest in a company that traditionally pays out a 5% return to its investors through its dividends. The choice is yours and does the math – it’s the return on investment that counts, not the number of rupees per share.
  • You can use Dividend Income to re-invest in the stock with the dividend amount you just received. So, you have increased your position size in the stocks without any additional capital. This will increase your stock holding over a period of time. I will share a reinvestment plan soon.

Which are the best dividend stocks and How should I find them?

Dividend Yield = Annual dividend/share DIVIDED BY Stock’s price/share

  • The best dividend paying stocks are those which have a Proven performance record. They have a long history of profitability, and thus, stable or even a growing trend in dividend payments.
  • My observation is that dividend-paying stocks, while certainly subject to the momentum of the overall market, tend to trade in a more narrow range. This is because the price per share is directly linked to the level of dividend, which yields a percentage return.
  • The best dividend stocks provide a return that competes or outperforms with other forms of highly liquid investments,
    particularly bank instruments such as savings accounts and Fixed deposits. The rate is also compared to longer-term government securities and treasury notes

To find the best dividend stocks, find stocks that pay the rate of return you are looking for via their dividend (and not historical price appreciation). Other factors then kick in, especially the history of the dividend itself, the past and current performance of the market overall, and the specific niche in which the company competes.

Whether shopping for a dividend return or price appreciation, the underlying strength and performance of the company are always your first consideration. Fundamental analysis is a must.

Dividend Income examples

You can filter the dividend paying stocks from below links:

Important advice: Dividend stock buying is not for everyone because everyone can’t tolerate the risk factors of being a stockholder. So do your own research or consult your financial advisor before taking any informed decisions.

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