After hearing the name dividends, basically four questions would come in the mind of retail investors like you and I

Firstly

What are dividends?

Second

How do dividends work and how do investors get dividends?

Third and most important

Which company has given its shareholders a lot of dividend

In the past year

Fourth

Should retail investors like you and I invest in dividend paying stocks or not

I, Jagdeep Singh, welcome you to the Groww channel

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What are dividends?

Now consider that I have a company, company A

And this company earns a profit of Rs. 100 every year

Now after earning the profit the company has two options about what to do with the profits

First,

The company can re-invest the profit in their business

So that they can expand their business

Secondly,

If the company doesn't have the possibilities to expand much

Then the company can share the profit among the shareholders

The third option the company has that out of a Rs. 100 earnings

Some money can be given to the shareholders

And some money can be used for growth

Now you must be thinking is it mandatory for a company to pay dividends

No, friends, I will clear one thing here

That no company has a compulsion that they have to pay a dividend

It is upto the company if they have to give a dividend or not

Now whenever we hear the term dividends, we get to hear four keywords

And many investors like you and I get confused on hearing that name

And the four common terms are

First

Announcement date

Second

Ex dividend date

Third, record date

Fourth, payment date

Now you must be wondering what the meaning of the jargons I used is

I will explain it to you one by one

Firstly, announcement date

Announcement date is that date when the company announces

That they are going to give dividends to the shareholders

And on the announcement date only the company

Announces the other dates as well

And after this comes ex dividend date

Ex dividend date is that date

Because of which, if you bought the stock even one day before

Then you are eligible to take dividends

Consider that the company's announcement date was 10th February

But the company said that their ex dividend date is 15th of march

The meaning of this is that

That if you bought that stock on 14th of march

Then you will get dividends

But on 15th march or anytime after that if you buy the stock

Then you won't get the dividend

Now I will talk about record date

What is record date?

Record date is that date

Where the company identifies which are the shareholders

They have to pay dividends to

And the record date normally comes the next day after the ex dividend date

And it comes on the next date because

Because if you buy a share a day before the ex dividend date

Then your settlement will happen in T+2 days

That will come on your record day

So you will be eligible to take dividend

And the final thing is payment date

This is the day where the company pays out the dividend directly in the bank account of the shareholders

Now I told you what a dividend is, how it works and how the company pays out its dividend

Now you must be most interested to find out

What are the companies that have given its shareholders the most dividends in the recent few years

Now I will tell you the name of those five companies

Who have given their shareholders a lot of dividends

The first name that comes in this list is Vedanta

Vedanta is a very big company whose business is spread out in many sectors

If I talk about its market cap

Then its market cap is of 53 thousand crores

But now you must want to know that in the past year

How much dividend has it given to its shareholders

So vedanta has, in the past year

Given a dividend of Rs. 18 to its shareholders

If I talk about its dividend yield

Then the dividend yield comes out to be 13%

But now you must be wondering how Vedanta's share price has performed in the past year

So, if I talk about Vedanta's share price, then Vedanta's share

In the past year

Has come down by around 26%

So, if we talk about Vedanta's net return in the past year

So from the price we get a loss of 26%

We get a dividend yield of 13%

The loss that Vedanta has given in the past year is -13%

If I compare this to NIFTY's performance

So NIFTY 50 in the past year

Has given a return of almost 10%

Now I will talk about the second company

And the second company is BSE ltd

Now after listening to this, you might get confused

That BSE is an exchange

So how did they pay dividend

So, BSE ltd is also a stock,

That trades at NSE

And BSE's stock doesn't trade at BSE

But it trades at NSE

If I talk about the dividend that BSE has given in the past year

Then in the past year BSE has given a dividend of Rs. 30

If I talk about dividend yield

Then the dividend yield is around 6%

If we talk about a 1 year return

How BSE has performed in price, so in terms of price in the past year,

It has given a -18% return

So if I see the price -18% return

If I see the dividend yield which is 6%

So the net loss that BSE has given its shareholders is of -12%

The third company is Coal India

The IPO of Coal India was India's biggest IPO

And it's monopoly is in the coal business

And it is a public sector company

If I talk about dividend then in the past year, Coal India has given a Rs. 30 return

And its dividend yield is around 6.8%

If I talk about price

Then its performance in price in the past year has been -20%

The fourth company in this list is REC

Rural Electrification Corporation

This is a company that finances electrification in India

And because of electrification there was a rise in demand in India in the recent times

Because of which this company came in the limelight

If I talk about dividends then in the past year, this company has given a dividend of Rs. 11

Per share

Then it's dividend yield is around 8%

But in this company a very interesting thing comes into picture

If I talk about price performance, then in the past year

The price performance of this company has been +30%

So if we talk about net return

Then their price performance returns turns out to be +30%

And the dividend yield turns out to be 8%

So this company has, in the past year

Given a net return of around 38%

The fifth company in this list is IOCL, this is an oil marketing company

Which is owned by the government

If I talk about the dividend pay out in the past year

Then this company in the past year has given a dividend pay out of more than Rs 9

If I talk about its dividend yield

So it is a little more than 7%

Now you must be wondering how the price performance of this company has been

In the past year

If I talk about price performance

Then the price performance of this company in the past year has been -7%

So the net return of this company is -7%

Plus 7.42%

So this company has given an almost positive return in the past year

Now let us come to the last question

That should retail investors like you and I invest in dividend paying stocks

And if we are investing then when and how should we invest

So, I have always told you

That every investor has a different risk

According to them, there is a different investment

Where they should make an investment

So dividend is right for those people

Who want a stable income

Because the benefit of dividend is that your uncertainty becomes very low

Because the company pays you dividend at regular intervals

So as you continue to get dividend, then your source of income is continuous

So for them, dividend paying stocks are very good

Who don't want to take volatile stocks or price risks

So, for what kind of investors aren't high dividend paying stocks good

So those people should not invest in high dividend paying stocks

Who want to invest in growth companies in the coming time

If I talk about growth companies

So those companies who keep a lot of growth capabilities in the coming time

And the companies who keep growth capabilities in the coming time

They don't pay their profit to shareholders directly

But those companies re-invest their profit into their company

And in the sectors where expansion is possible, they expand themselves in those sectors

So, those companies that pay a high dividend

Then it is also said in the industry, that those companies

Don't have a lot of growth possibilities left

Now in the mind of every investor this question comes that whenever he earns an income, how can he pay tax on that

Like if in stocks I have capital gain

Then on capital gains, I have to pay a certain amount of tax

So, even on dividends, do we have to pay taxes?

No, friends

For investors, dividend is a tax free income

Because the tax for that is paid at the company's level

And whatever dividend you get in hand

You get in your bank account,

It is completely tax free

So, friends, I will end this video with two thoughts for you

First,

If you want a fixed income and you don't want to take much risk

Then maybe for you high dividend paying stocks are really good

But if any investor wants to invest aggressively

Who wants to invest in growth stocks

Then maybe dividend paying stocks won't be that good for him

I will end this video with two questions for you

First question

In what category are you most interested to invest in

High dividend paying stocks, or growth stocks

And in this category, which stock have you chosen

You can comment down below and let us know

So that our other viewers can benefit from that

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