This chapter will acquaint you with the meaning, types and purposes of dividend. Dividend is a portion of the profits distributed to shareholders in a company and is usually expressed as a percentage of nominal value of shares. Dividends are often paid in cash, though in theory other forms also exist.

Dividend affects the mood of the present shareholders, it also influences the behaviour and response of prospective investors, stock exchanges and financial institutions because of its relationship with the worth of the company which in turn affects the market value of its shares. The decision regarding dividend is taken by the Board of Directors and is then recommended to the shareholders for their formal approval in the annual general meeting of the company.