equity dividend

Here is the surprising part. A company can be doing brilliantly, posting record profit, and still decide to pay you nothing at all as a shareholder. Equity dividend is never guaranteed, no matter how well the business is doing, because the board can choose to keep every kobo of profit inside the company instead of sharing it out.

So what is it exactly? When you own shares in a company, you own a small slice of it. If that company makes a profit and decides to reward its owners, it pays out equity dividend, usually as cash dropped into your account per share you hold, sometimes as extra shares instead.

Take Dangote Cement or MTN Nigeria on the Nigerian Exchange. When they announce results and declare a dividend of, say, ₦20 per share, anyone holding those shares on the qualifying date gets paid that amount for every share they own, straight into their bank account through their stockbroker.

In the United Kingdom, a company like Shell or National Grid on the London Stock Exchange does the same thing, often paying quarterly rather than once a year. Someone in the diaspora holding shares back home in a Nigerian company can receive these dividends too, sometimes with tax already deducted before it reaches them.

The backwards bit worth remembering is this. Fast growing companies, the ones expanding branches or building new plants, often pay little or no equity dividend, because they are ploughing profit back into growth. Older, steadier companies tend to pay more generously, because they no longer need every naira for expansion.