What is dividend investing?
When a company makes a profit, it may share part of it with its shareholders. This is a dividend. Dividend investing means choosing shares in companies that have paid regular cash dividends year after year, so that income comes in without selling any shares.
But dividends are not compulsory. The company’s board proposes them and the annual general meeting (AGM) approves them. If profits fall or the business needs cash, dividends can be cut or stopped. So this is not fixed income like interest on an FDR.
Say Aunt Nasrin rents out a shop. The rent comes in every month and she never has to sell the shop. Dividend investing follows the same idea: keep the shares and collect a share of the profits. The difference is that rent comes with a contract, while dividends do not; if the company’s profits fall, the “rent” can fall too.
Why it matters to an investor
- To measure your real income: what counts is the taka you receive compared with the price you paid, not the declared percentage.
- To get a signal about the company’s health: paying cash dividends year after year needs real cash profits.
- To understand total return: a share’s return is dividends plus the change in price. You can collect a big dividend and still lose overall if the price falls.
- To know what is left after tax: tax is deducted from dividends at source, so you receive less.
What a “20% dividend” means
In Bangladesh, dividends are usually declared as a percentage of face value, not of the market price. In 2011 the regulator set a uniform face value of Tk 10 for shares and mutual fund units. So a “20% cash dividend” usually means Tk 2 per share, whether the share trades at Tk 100 or Tk 30.
For a real comparison, look at dividend yield: dividend per share ÷ market price per share. A Tk 2 dividend on a Tk 100 share is a 2% yield; on a Tk 25 share it is 8%.
Cash, bonus and the record date
- Cash dividend: money paid straight into your bank account. Under a 2021 BSEC directive it is due within 30 days of approval at the AGM; the rule can change.
- Bonus or stock dividend: extra shares instead of cash. You own more shares, but the company is worth the same in total, so the price usually adjusts in proportion. It is not really new income.
- Record date: only those on the shareholder list on that date receive the dividend. Afterwards the share price usually adjusts by roughly the dividend amount, so buying just before and selling just after is no sure gain.
Tax, and whether it can last
Under the Finance Act 2026 (for the 2026–27 fiscal year), dividend income for individual investors is taxed at a flat 15%, treated as the final tax. Previously 10–15% was deducted at source, with possibly more due later depending on your tax bracket. Each year’s Finance Act can change this.
When a yield looks very high, ask why. Often the yield is high because the price has fallen, and the price has fallen because profits are shrinking. A company paying out more than it earns, or borrowing to pay dividends, cannot keep it up for long.
Worked example
- Say you buy 1,000 shares at Tk 80: cost Tk 80,000. The company declares a 20% cash dividend (on Tk 10 face value).
- That is Tk 2 a share, Tk 2,000 in total. Yield: 2 ÷ 80 = 2.5%, not 20%.
- After 15% tax you receive Tk 1,700, about 2.1% of what you paid.
Result: a “20% dividend” sounds large, but at this purchase price the real income after tax is about 2%. And if the share price falls 5% over the year, the total return is negative. The numbers are only an example.
Common mistakes
- Mistaking the declared percentage for your return. Work it out on the price you paid.
- Treating bonus shares as extra income, even though the price usually adjusts in proportion.
- Picking only by the highest yield without asking why it is so high.
- Assuming last year’s dividend will be paid again this year.
Measure dividends on the price you paid and after tax: a “20% dividend” often means just Tk 2 a share, and no dividend is guaranteed.