Business Mathematics and Basic Statistics · Ch 2 — Shares and Dividends
Dividend — Rate and Amount
Dividend — Rate and Amount
What is a dividend?
A dividend is the share of a company's profit distributed to its shareholders, expressed as a percentage of the face value of the share (never the market value). A company that declares "9% dividend" on a ₹10 face-value share is promising 9% of ₹10, i.e. ₹0.90, for every share held — regardless of what that share currently trades for in the market.
The dividend formulas
For a share of face value , at a declared dividend rate of :
For a holding of shares:
Dividend is on face value, always
A ₹100 face-value share paying an 8% dividend earns ₹8 per share every year, whether that share is currently quoted at ₹80, ₹100, or ₹150 in the market. This is exactly why two shares with the same rupee dividend can be very different investments — see Yield, next.
Worked reasoning
Suppose a company's share has face value ₹25 and declares a 12% dividend. The dividend per share is …
A percentage of a share's FACE VALUE, declared by the company and paid to shareholders as their share of profit. $\text{Dividend per share} = \dfrac{\text{rate}}{10 …