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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

A client holds 500 shares in demat form and the company declares a dividend of Rs 4 per share. How is the dividend normally paid to the client?

The client receives Rs 2,000, being 500 shares times Rs 4. The issuer or its registrar pays it using the beneficial owner and bank details provided by the depository as on the record date, not as additional shares or from the DP.

  1. ARs 2,000 is paid to the bank account details held with the depository as on the record date, by the company or its registrarCorrect
  2. BRs 2,000 is credited as additional shares in the demat account
  3. CRs 500 is paid by the DP from client fees
  4. DDividend is payable only if the client holds physical shares

Explanation

Dividend = 500 x Rs 4 = Rs 2,000. The depository provides the beneficial owner details, including bank details, as of the record date to the issuer, which pays through the registrar. Dividend is not converted into shares.

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