A dividend is a manner in which a company shares its wealth, which it generates out of the course of business with the shareholders. Dividends are paid to a shareholder on a quarterly or half yearly or on an annual basis. Dividends, by the name of dividends have to be mandatory paid in cash as per Section 205 (3) of the Companies Act 1956. However, another form of dividend though not termed, as dividend is the issue of bonus shares, which for all financial purposes is also a proxy for dividends. Companies have an option of paying out dividends out of their current earnings after tax or out of retained earnings. Companies in a high growth phase normally deploy the complete earnings in the business and so tend to not give dividends, but companies, which are in a stable phase, normally share it with the investors as dividends.

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