What is a dividend?
When a company makes a profit for the year, it can do two things with the money: put it back into the business (new machines, new branches), or share it among its owners, the shareholders. The part that is shared out is the dividend. It is one of the two sources of a share’s return; the other is the price going up, the capital gain.
Paying a dividend is the company’s choice, not an obligation. The board of directors proposes it and the shareholders approve it at the annual general meeting (AGM). A company that is making losses, or needs the cash for its business, may pay nothing.
Say five neighbours buy a van together, in equal shares, and rent it out. At the end of the year the rent brings in a Tk 50,000 profit. They decide to keep Tk 20,000 for new tyres and repairs and share out the other Tk 30,000, Tk 6,000 each. That Tk 6,000 is each person’s “dividend”. The people and numbers are made up.
Why it matters to an investor
- To understand total return: a share’s gain is dividends plus the price change. Looking at only one gives half the picture.
- To qualify on time: if the shares are not in your BO account on the record date, you get no dividend, however long you held them before.
- To tell cash and stock dividends apart: they sound alike, but only one puts money in your hand.
- To avoid losing track of your money: if your bank details are wrong, dividends can get stuck.
From announcement to payment
- Board declaration: once the year’s accounts are final, the board meets, proposes a dividend, and sets the record date and AGM date. The news is published on the exchange’s website.
- Record date: the date whose shareholder list decides who gets the dividend and who can vote at the AGM. In Bangladesh the share does not trade on the record date itself, and trades in the days before it settle faster so that buyers make it onto the list in time. Proposals to change this rule are under discussion.
- AGM: shareholders approve the proposed dividend.
- Payment: under a January 2021 BSEC directive, a company must pay a cash dividend within 30 days of AGM approval, electronically into the shareholder’s bank account. The rule can change.
Cash, stock and the payout ratio
A cash dividend brings money. A stock dividend (bonus shares) means extra shares instead of money; the company is worth the same in total, just cut into more pieces, so after the record date the price adjusts in proportion. In Bangladesh both are usually declared as a percentage of the Tk 10 face value: “10% cash” means Tk 1 per share, and “10% stock” means one new share for every ten held.
The payout ratio tells you what share of profit the company paid out: dividend per share ÷ earnings per share (EPS). A low payout means most of the money is going back into the business; a payout above 100% means the company is paying more than it earned that year, out of past savings or borrowing, which usually cannot last.
Tax, and unclaimed dividends
Under the Finance Act 2026 (for the 2026–27 fiscal year), dividend income for individual investors is taxed at a flat 15%, which the company deducts before paying and which counts as the final tax. Earlier years had different rules, and each year’s Finance Act can change it. A stock dividend puts no cash in your hand, so the question of tax at source works differently there.
If your bank account is closed or the details in your BO account are wrong, the money does not arrive. Under BSEC rules, dividends unclaimed for three years must be moved to the Capital Market Stabilization Fund (CMSF), though the owner can still claim them later by proving ownership.
Worked example
- Say a company’s earnings per share (EPS) for the year are Tk 4. The board proposes a 20% cash dividend, meaning Tk 2 a share on the Tk 10 face value.
- Payout ratio: 2 ÷ 4 = 50%. The other Tk 2 a share stays in the business.
- You have 500 shares in your BO account on the record date: total dividend Tk 1,000. After 15% tax, Tk 850 arrives in your bank account.
Result: the announcement says “20%”, but you receive Tk 1.70 a share, and the company has kept half its profit for the future. What that is as a percentage of the price you paid is your real dividend yield. The numbers are only an example.
Common mistakes
- Buying on or after the record date and expecting this round’s dividend.
- Thinking “I’ve made a loss” when the price drops after the record date. That adjustment is the other side of the dividend or bonus shares.
- Being pleased by a payout above 100% without asking where the money is coming from.
- Not keeping the bank details in your BO account up to date, so dividends get stuck.
A dividend is the company’s choice, not a promise: hold the shares on the record date to qualify; a cash dividend arrives after tax, while a stock dividend adds shares but the price adjusts to match.