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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