In a good move, the Securities and Exchange Board of India, SEBI, has asked listed companies to declare dividends on a per share basis rather than on a percentage basis.
In order to bring about uniformity in the manner of declaring dividend among listed companies, Sebi has made it mandatory for companies to declare their dividend on a per share basis only. This means that irrespective of the face value of the share, the company will have to mention the dividend on an absolute basis.
For instance, a company having shares of face value Rs 2, and declaring a dividend of Rs 2, will have to say that it has declared a dividend of Rs 2 per share and not a dividend of 100%.
This is meant to bring more clarity to an average investor who sometimes gets caught up in the jugglery of percentages and values when companies declare dividends. Thus, it will bring uniformity in the declaration of dividends by listed companies.
The move will clear the confusion among share holders whether the dividend declared was a percentage of the face value or the market price. It also becomes relevant when companies reduce the face value of shares over a period of time, which some investors might not be able to track.
Also, the calculation of actual returns in terms of Rupees becomes much easier, when the dividend information is available on a per share basis. Share holders will just have to multiply the number of shares they own by the dividend per share amount that the company declares. And for the mathematically inclined, they can just go ahead and calculate the dividend percentage if they want.
The change will be with immediate effect.
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