New Delhi. You get many earning opportunities in the stock market. One of these is dividend. Every company gives some part of its profit to investors in the form of dividend. Dividend is usually paid after quarterly results or completion of financial results.
People often have this question regarding dividend that the share price decreases after the record date. So is its money deducted from shares?
Why do shares decrease?
Earlier there was a concept of T+2 in the stock market. Now the concept of T+1 has arrived. Due to which the ex date and record date have started falling on the same date. Earlier there used to be a gap of 1 or 2 days. Let us understand in simple language.
There is a rule to get the dividend. Under this, you can get the benefit of dividend only if you have shares of the company before the record date. Along with this, if an investor buys shares of a company which distributes dividend after the record date, he will not get this benefit.
In such a situation, the new investor does not consider it a fair deal. He thinks that if he does not get the benefit of dividend then why should he pay for it. Along with this, people who have shares of the company which distributes dividend can sell it after holding it till the record date.
Understand this with an example. Suppose the share of a company is worth Rs 20 and it gives a dividend of Rs 2, then on the ex-date, which will also be the record, the share of that company will trade at Rs 18 (market price minus the dividend).
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