Dividend and Rate of Dividend

We will discuss here about the dividend and rate of dividend. The part of the annual profit of a company distributed among its shareholders is called dividend. The dividend is always declared by the company on the face value (FV) of a share irrespective of its market value. The rate of dividend is expressed as a percentage of the face value of a share per annum.

Definition of Dividend: The profit which a share holder gets (out of the profits of the company) for his investment from the company is called dividend.

I. Meaning of the statement “r % $100 shares at$ P”

The statement r % $100 shares at$ P means the following:

1. The face value of a share is $100. 2. The market value of a share is$ P.

3. The dividend (profit) on a share is r % on NV, i.e., $r per annum. 4. The income from one share for one year is$ r on $P. II. Meaning of the statement “r %$ K shares at $P” The statement r %$ K shares at $P means the following: 1. The face value of a share is$ K.

2. The market value of a share is $P. 3. The dividend (profit) on a share is r% on$ K, i.e., $$$\frac{rK}{100}$$ per annum. 4. The income from one share for one year is$ $$\frac{rK}{100}$$on $P. For Example: “20 % of$ 100 shares at $140” means that 1. The face value of a share is$ 100.

2. The MV of 1 share is $140. 3. The dividend on 1 share is 20 % of$ 100 = $20 per annum. 4. The income from on$ 140is $20 for one year. Similarly, “25 % of$ 35 shares at a discount of $15” means that 1. The NV of a share is$ 35

2. The MV of 1 share is $35 -$ 15 = $20. 3. The dividend on 1 share is 25 % of$ 35 = $($$\frac{25}{100}$$ × 35) =$ 8.75 per annum.

4. The income from on $20 is$ 8.75 for one year.

Shares and Dividends

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