A date decides who is paid.

From a decision to a debt

Suppose Bharat Foods has a good year and its board recommends a final dividend of ₹4 a share. A recommendation is not yet a payment. A final dividend has to be approved by shareholders at the annual general meeting; an interim dividend, paid part-way through the year, is declared by the board on its own.

Once a dividend is declared, the character of it changes. Under India's Companies Act it must be paid within 30 days, and a company that fails without a lawful reason faces penalties. Before declaration, the money is the company's to keep. After it, the money is owed.

Your ten shares would bring you ₹40. The whole payout, across one crore shares, would take ₹4 crore out of the company — the two numbers 01.01.06 let you drag apart.

Four dates, and the one that matters

Every dividend comes with dates. The declaration date is when it is approved. The payment date is when the cash arrives in bank accounts. Between them sit the two that decide who is paid.

The record date is the day the company reads its list of shareholders — for shares held in demat form, the list the depositories keep. Whoever is on it at the end of that day is paid, whether they have held for ten years or ten days.

The catch is settlement. 01.04.04 showed that a share you buy today reaches your demat account on the next trading day. So a purchase made on the record date itself arrives too late to be on that day's list. Under T+1 settlement the ex-date — the first day the share trades without the dividend attached — is therefore normally the record date itself. Exchanges publish both for every corporate action; check the notice rather than assuming.

Why buying the day before is not free money

It looks like a loophole: buy on Thursday, collect ₹4 a share, sell on Friday. It is not one. The ₹4 was part of what the company owned. When it is promised out to shareholders, the company is worth that much less, and from the ex-date the share trades without the right to it.

So the price usually opens lower on the ex-date by something close to the dividend — usually, not exactly, because prices move for many reasons on any given day. What you gain as cash you tend to lose in price.

And the two halves are not treated alike. A dividend is taxed as your income in the year you receive it; how that works, and how it compares with the tax on a price gain, is chapter 01.09. The trade that looked free carries a cost that the price never showed you.

The percentage that is not a return

Indian companies often announce dividends as a percentage — and the percentage is of face value, not of the price. 01.01.03 fixed Bharat Foods' face value at ₹10, so ₹4 a share is announced as "40%". It sounds like a 40% return. At a ₹500 price it is 0.8%.

The number that relates the dividend to what you actually pay is the dividend yield: the dividends per share over a year, divided by the current price. It is a ratio, so it moves whenever the price moves. A yield that looks high can be high because the price has fallen, which is not the same thing as a generous company.

And it looks backwards. A yield is built from dividends already paid; the next one still has to be decided, and 01.01.06 has not changed — it is a decision, not a promise.

A dividend moves cash from the company to you and takes the same amount out of the share. The next corporate action looks, on your screen, far more dramatic — your share count doubles overnight — and moves no value at all.