A Dividend is a distribution of earnings from a stock or a Mutual Funds . In Mutual Fund schemes, dividends are distributed when the fund has booked profits on the sale of securities in its portfolio.
As per regulation, a fund can declare dividends only from the gains it has made from the sale of securities in the portfolio, or through any current income in the form of interest or dividends. Such gains are transferred to a Dividend Equalization Reserve, and at the discretion of the trustees, a dividend is declared.
Dividends are declared as a percentage of the scheme’s face value (FV), and not the NAV. If FV per unit is Rs. 10 and dividend rate is 20%, every investor in the dividend option gets Rs.2
Read more
