What Are Dividends? Types and Examples

If you are new to investing, you have likely come here to know what the term dividends means? Imagine you and four friends start a lemonade stand. You all invest ₹100 each. At the end of the month, your stand makes a profit of ₹500. Now, instead of using all the profit to expand the business, you decide to share ₹200 among yourselves. Each person gets ₹40. That ₹40 is like a dividend.

What are Dividends?

When you buy a company’s shares, you own a tiny part of that company. When the company makes a profit, it may choose to share some of that profit with you. That shared profit is called a dividend.

For example,

• Let’s say ITC Ltd. declares a dividend of ₹7.5 per share.
• You own 200 shares.
• You receive: ₹7.5 × 200 = ₹1500 directly in your bank account.

But the next day, ITC’s share price may fall by ₹7-8, reflecting the dividend paid out.

Types of  Dividends 

Here are the types:

Cash Dividends: 

• The company pays you actual money for each share you own.
• This is the most popular and preferred method by investors.

For example:
If the company declares ₹10 per share as a dividend, and you own 500 shares:
₹10 × 500 = ₹5,000
You get ₹5,000 directly in your bank account.

Stock Dividends: 

• Instead of cash, the company gives you extra shares.
• Useful for long-term investors who want to grow their holdings.

For example:
If a 20% stock dividend is declared and you hold 200 shares:
You’ll receive 40 more shares = total becomes 240 shares.

Property Dividends:

• Instead of cash or shares, the company gives out assets like:
• Real estate
• Physical goods
• Intellectual property

For example:
A company might give out a patent or some real estate to its shareholders. This is very rare, especially in the Indian stock market.

Scrip Dividends:

• The company doesn’t give cash now, but gives a promissory note.
• It’s like saying, “We’ll pay you this money later.”

For example:
The company gives you a slip (IOU) saying it will pay a ₹1,000 dividend after 6 months when it has enough cash.

Liquidating Dividends:

• Given that the company is shutting down or winding up.
• They distribute the remaining assets to shareholders.

For example:
If the company is closing and decides to return 60% of its leftover assets to shareholders, that’s a liquidating dividend.

Special Dividends:

• A company has extra profit or cash and gives you a surprise payment.
• It’s not regular, just a one-time bonus.

For example:
If a company announces a ₹5 per share special dividend due to an unexpected profit, you receive a surprise cash bonus.

How does a Dividend Work?

Here is how a dividend works:

• The Company Makes a Profit:
  Like how a shop earns money after selling items, companies also earn profit through their business.
• Board of Directors Takes a Call:
  The company’s top people (called the Board of Directors) decide: “Should we keep all the profit or share some with our shareholders?” If they decide to share, it becomes a dividend.
• Company Announces a Dividend:
  They will say something like: “We are giving ₹5 dividend per share.” That means for each share, you will get ₹5.
• You Own Shares:
  Let’s say you own 100 shares of that company. So your dividend = ₹5 × 100 = ₹500
• Money Comes to Your Bank Account:
  You don’t need to do anything. The money will automatically come to your bank account linked to your demat account. Just like receiving a UPI payment.

Impact of Dividend on Share Prices

Here is the impact of dividends on share prices:

• Before Dividend Is Paid (Price Goes Up)
  Just before the ex-dividend date (the last date to buy shares and still get the dividend), many people want to buy the stock to earn that dividend. So, demand increases, and the share price usually goes up.

• After the Dividend Is Paid (Price Drops Slightly)
  Once the dividend is declared and paid, the company has less cash. Because of that, the stock price usually drops by about the same amount as the dividend. Example: If a stock is ₹200 and the company gives ₹10 as a dividend, the price may fall to around ₹190 after the ex-dividend date.

Imagine the company like a box of sweets. If the company gives you 2 sweets (dividends), then,

• The box now has fewer sweets (less cash).
• So, the box is slightly less valuable than before.

That’s exactly what happens with the stock price; it adjusts a bit because some value has been handed out.

Benefits of getting Dividends

Here are some benefits of getting dividends:

• Regular Income: Like rent from a flat you own. Even if the flat's value goes up or down, you still get monthly rent. Dividends work the same way, extra cash while you wait for your stock to grow.
• Confidence booster: Only companies that make steady profits and manage their money well give out dividends. So if they pay you regularly, it means things are going strong.
• Compounding Magic: If you use the dividend money to buy more shares, those new shares can also give you dividends. This is called compounding; your money makes more money.
• Less Risky Ride: Big, mature companies (like ITC or HDFC Bank) often pay dividends. Their share prices don’t jump around too much, so your investment is safer compared to risky startups.

List of Dividend-Paying Companies

Here is the list of dividend-paying companies in India:

Company Name	Dividend Type	Dividend (%)	Announcement Date	Record Date	Ex-Dividend Date
CIPLA	Special	150	May 13, 2025	Jun 27, 2025	Jun 27, 2025
CIPLA	Final	800	May 13, 2025	Jun 27, 2025	Jun 27, 2025
HDFC BANK	Final	2200	Apr 21, 2025	Jun 27, 2025	Jun 27, 2025
MAH. SCOOTERS	Special	300	Apr 23, 2025	Jun 27, 2025	Jun 27, 2025
SWARAJ ENGINES	Final	1045	Apr 16, 2025	Jun 27, 2025	Jun 27, 2025
BAJAJ FINSERV	Final	100	Apr 29, 2025	Jun 27, 2025	Jun 27, 2025
TATA POWER	Final	225	May 14, 2025	Jun 20, 2025	Jun 20, 2025
SUPREME INDUSTRIES	Final	1200	Apr 24, 2025	Jun 20, 2025	Jun 20, 2025
PNB (Punjab National Bank)	Final	145	May 7, 2025	Jun 20, 2025	Jun 20, 2025
TATA TECHNOLOGIES LTD.	Special	167.5	May 19, 2025	Jun 16, 2025	Jun 16, 2025
HONEYWELL AUTOMATION	Final	1050	May 13, 2025	Jun 16, 2025	Jun 16, 2025
ADANI ENTERPRISES	Final	130	May 2, 2025	Jun 13, 2025	Jun 13, 2025
ACC	Final	75	Apr 24, 2025	Jun 13, 2025	Jun 13, 2025
CANARA BANK	Final	200	May 8, 2025	Jun 13, 2025	Jun 13, 2025
TCS (Tata Consultancy Services)	Final	3000	Apr 11, 2025	Jun 4, 2025	Jun 4, 2025
ASIAN PAINTS	Final	2055	May 8, 2025	Jun 10, 2025	Jun 10, 2025
BANK OF BARODA	Final	417.5	May 6, 2025	Jun 6, 2025	Jun 6, 2025
L&T TECHNOLOGY SERVICES	Final	1900	Apr 24, 2025	Jun 6, 2025	Jun 6, 2025
INDIAMART INTERMESH	Special	200	Apr 29, 2025	Jun 6, 2025	Jun 6, 2025
INDIAMART INTERMESH	Final	300	Apr 29, 2025	Jun 6, 2025	Jun 6, 2025

Also read: What is Market Capitalization? Explained with Indian Examples

Concluion 

In Conclusion, Dividends are one of the easiest ways to earn passive income from the stock market. You don’t need to be a financial expert to benefit from them. Just find reliable, profit-making companies that share their success with their shareholders.