When you buy a stock or share of a company you become a part-owner and are also entitled to a share in its profits. When a listed company shares its profits with shareholders, this payout is termed as a dividend.<\/p>\n
Most stock market investors have a clear goal of investing which is dividend income. However, listed companies are not bound to pay dividends, therefore, as investors, we have to shortlist companies that pay dividends regularly.<\/p>\n
When listing out such companies we look at historic trends and determine whether a particular company pays regular dividends and what is the proportion of the same.<\/p>\n
Contents<\/p>\n
Investors who have a low-risk profile or are risk-averse may look at investing in high dividend-yielding stocks, which not only gives them regular income but also safety from major share price fluctuations.<\/p>\n
Also, investing with an expectation of capital appreciation brings along higher risk because investors cannot be certain of stock price increase over a certain period, but dividend income is more predictable.<\/p>\n
Investors may look at companies that not only pay regular dividends but it also grows every year.<\/p>\n
A dividend is something that companies payout of their net profit, therefore as net profit grows so does the dividend.<\/p>\n
So, investors can look at a company’s profit and loss accounts and see if the profits are growing along with the dividend. If a company\u2019s profit is growing and also its dividend then the company\u2019s dividends are likely to increase gradually.<\/p>\n
There are some terminologies which you will often hear when it comes to dividend, lets see what they mean.<\/p>\n
Dividend yield is the company\u2019s annual cash dividend per share divided by its current stock price.<\/p>\n
Dividend ratio means the ratio of annual dividend paid to shareholders to the face value of the stock.<\/p>\n
The payout ratio is earnings paid out as dividends to shareholders divided by the total earnings of the company in that year.<\/p>\n
FYI: Be cautious if a company\u2019s payout ratio is high because it may mean that the company is not investing its profits in growth.<\/p>\n
Average dividend – Rs. 24<\/p>\n
Average dividend payout (in percentage) – 38%<\/p>\n
Average dividend – Rs. 4<\/p>\n
Average dividend payout (in percentage) – 31%<\/p>\n
Average dividend – Rs. 9<\/p>\n
Average dividend payout (in percentage) – 33%<\/p>\n
Average dividend – Rs. 10<\/p>\n
Average dividend payout (in percentage) – 48%<\/p>\n
Average dividend – Rs. 35<\/p>\n
Average dividend payout (in percentage) – 51%<\/p>\n
Average dividend – Rs. 4<\/p>\n
Average dividend payout (in percentage) – 36%<\/p>\n
Average dividend – Rs. 25<\/p>\n
Average dividend payout (in percentage) – 39%<\/p>\n
Average dividend – Rs. 4<\/p>\n
Average dividend payout (in percentage) – 63%<\/p>\n
Investors looking for a steady income and who are less risk-averse should invest in a stock paying a high dividend rather than investing with the hope of capital appreciation.<\/p>\n","protected":false},"excerpt":{"rendered":"
When you buy a stock or share of a company you become a part-owner and are also entitled to a share in its profits. When a listed company shares its profits with shareholders, this payout is termed as a dividend. Most stock market investors have a clear goal of investing which is dividend income. However,Continue reading “Investing in dividend-paying companies”<\/span><\/a><\/p>\n","protected":false},"author":17,"featured_media":1491,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-1490","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance"],"_links":{"self":[{"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/posts\/1490","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/comments?post=1490"}],"version-history":[{"count":0,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/posts\/1490\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/media\/1491"}],"wp:attachment":[{"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/media?parent=1490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/categories?post=1490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.paytmmoney.com\/blog\/wp-json\/wp\/v2\/tags?post=1490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}