Guide For Making Money From Dividends On Stocks

For an investor, there are two primary ways of earning money from stock investing;

1. Sell the stocks at a higher price than you bought and earn capital appreciation.
2. Earn dividends on the stocks announced by a company.

Earning dividends can help investors help them retain their shares and still earn money from their investments. Let's look at some of the common queries every new investor may have regarding this second way of making money from stock investing.

The dividend may be looked upon as a proportion of the profits or the surplus amount, which the company's board of directors may decide to pay as a reward to their valuable shareholders. The companies are not bound to declare dividends every time they earn a profit, but they may choose to do so to showcase their financial stability and attract more investors.

One of the reasons why companies offer dividends is that they do not have enough opportunities to reinvest their profits to expand further and grow the company. Other reasons may be to retain their investors and attract new investments.A company may offer dividends in the form of cash, bonus shares, scrip, and property dividends. Cash dividends are the most common and popular type of dividend.

If you wish to earn a decent sum through money from dividends , you must keep in mind the below-mentioned points:

• Check Historical Records: You must look for stocks of companies that steadily keep boosting their dividend payout. A well-established and financially sound company may be expected to declare regular dividends that keep increasing with time. You may check the company’s dividend figures for the last 5-10 years before investing.
• Check Taxation Rules: Be aware of the tax rules applicable to your dividend earnings. If you are receiving a dividend from an Indian company that is below 10 lakhs, it is completely exempted from tax. Dividends received from overseas companies will be taxed as per your tax slab.
• Invest for Long-term: Dividend earnings are more fruitful in the long run. So, stay consistent and be patient with your investment to ensure a good dividend yield.

While investing, ensure that the company is well-established with a strong foundation. Also, check out and compare the dividend payments of different companies before arriving at an investment decision.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.