Investing in Dividend Paying Stocks

What does an Investor need to keep in mind while buying a company that has declared Dividend?

There are some important dates which the investor needs to be aware of before investing in a company that has recently declared a dividend.

Dividend declaration date: This is the date on which the board of directors announces the consideration of dividend. Subsequently the shareholders approve the dividend in AGM or through postal ballot (generally, the board of directors have shareholder's pre-approval till a certain level of dividend payout)

Ex-dividend date: On (and after) this date the security trades without its dividend. If an investor buys a stock (cum dividend) before the ex-dividend date he would be eligible for the dividend but if the stock is bought on or after the ex-dividend date, the investor would not qualify for the dividend. The ex-dividend date is usually fixed one day before the record date.

Record date: This is the date on which the company looks at its records to ascertain the shareholders eligible for dividend. An investor name should be in the record of shareholder register to avail the benefit of dividend

Dividend payable date: On this date, the company credits shareholders' account with the dividend amount

However, dividend and dividend yield should be only taken into consideration if the company posts healthy financials. Companies paying a special dividend or a one-off payment due to an exceptional gain which is not expected to be repeated in future should be excluded from this group.

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