Prashantha Narayana asked : How dividend is calculated?
For example - : Indiabulls securities
Last dividend was announced on 29/06/09 and I was not holding shares at that point of time, I was holding it between September and November. But still they credited the Amount.
How is it possible? How is it calculated for all companies in general.
Answer : Always remember that bonus is paid using the companys cash balance or in the form of stock.
If they pay cash bonus, the total bonus amount has to come out of the cash balance

Here is an example.

Assume the company has 100 rupees in cash balance and decided to pay 10 rupees as bonus.
Once the Rs.10 is paid as bonus, the company is left over with Rs. 90 in cash.
So the companys stock has to adjust to this new reduction in cash balance and has to adjust
down.

From an investors point of view, there will be no net profit as the reduction in stock price
will be compensated by Rs.10 received in bonus.


Similarly if the company paid stock bonus, it means the company is diluting the number
of outstanding share quantity by increasing them. This means that the company's assets
are now available to more number of investors there by reducing the claim of each stock
on the comapany's net assets. Ultimately there is no net profit as such to the investor