"1860% dividend announced", goes the headline. You're excited. But the question isn't, "Where do I sign?", but "1860% is great, but a percentage of what?"
The number is a percentage of "face value" which is as relevant today as a rotary-dial telephone. When a company is created, the founders distribute the initial capital into shares. A company started with Rs. 100,000 could be split into 10,000 shares of Rs. 10 each (the "face value" per share).
This company can, over time, earn enormous profits without any further capital requirements. Or, it might borrow money from a bank to fuel expansion and as it profits from growth. The capital could remain unchanged, with the original shares changing hands in a stock market. If the company grows to earn, say, Rs. 10 crore (Rs. 100 million) in profits, and decides to distribute half of it as profit, what happens?
You have a distribution of Rs. 5 crore (50 million) divided over 10,000 shares, or a dividend of Rs. 5,000 per share. The "face value"Read More »from Making Sense of Dividend Announcements