A dividend is a distribution of company profit paid out to shareholders, usually as a fixed rupee amount per share. Dividends are entirely discretionary — no company is obligated to pay one, and many high-growth companies choose to reinvest profits instead. SEBI’s investor education material covers shareholder rights around dividends in more depth.
Who Pays Dividends More Often
Mature, stable companies (banks, FMCG, utilities) tend to pay dividends more consistently than high-growth companies, which often prefer to reinvest profits back into the business.
Related Reading
Read the full explanation in What Are Stocks? Ownership, Price, and Value Explained.
Example
A company trading at ₹500/share declares a dividend of ₹10/share. A shareholder holding 100 shares receives ₹1,000, and the stock typically opens the next session (its ex-dividend date) around ₹490 — the payout reduces the company's cash and, with it, its market value by roughly the same amount.
Frequently Asked Questions
Is a dividend guaranteed once a company has paid one before?
No. Past dividends create an expectation, not an obligation — a company's board can reduce, skip, or stop dividends at any time, most often when profits fall or cash is needed elsewhere in the business.
What is dividend yield?
Dividend yield is the annual dividend per share divided by the current share price, expressed as a percentage. It's how dividend payouts are compared across companies regardless of their share price.
Are dividends taxable in India?
Yes. Dividend income is taxable in the hands of the shareholder at their applicable income tax slab rate, and companies deduct TDS above a threshold — see the Income Tax Department's guidance for current rules.