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All about making the receipt of dividends a smooth affair

Investors holding shares of a company on the record date are eligible. If there is a discrepancy in your bank account details, the dividend does not get credited.

December 26, 2019 / 08:28 AM IST

Apart from capital appreciation, investors in stock markets seek dividends. There are some companies that are specifically attractive as they provide good dividend yields. Normally the period for the payout to investors is from July to November every year.

If you are an investor in a company that has declared dividends, but are yet to receive it, there may be several reasons why you may not have received the payout.

Are you eligible for receiving the dividend?

Many times, investors track companies that announce dividends and then plan to buy the shares of those firms. It could be a short-term trade; it may also be a good bet for the long run. However, many forget that timing the purchase is important in such a situation. You should be the shareholder of the company on the record date. “Investors holding shares of a company on the record date are eligible for the dividend. If you buy the shares at least two days before the record date, then you would be eligible for the dividend,” says Narendra Jain, Director, IIFL Securities.

For example, if the record date is December 12, then investors who buy the shares on (or before) December 10 are eligible for dividends, as the shares will reach their demat account on  December 12. Those who buy it on 11 December will not get paid, as the shares would reach their demat accounts only on December 13 – after the record date. Thus a T+2 settlement cycle is followed.

Close

The dates of announcement, record and payout of dividend can be different. In case of hefty dividend payouts, the stock price adjusts closer to the record date.

Most proactive brokers, using technology to their advantage, do update you on dividend announcements. A full-service broker alerts clients on such payouts.

Non-receipt of dividends

A registrar and transfer agent (RTA) helps the company to ascertain the list of eligible shareholders for the payout of dividends. The company credits the dividend amount to the bank account registered with the demat account. The credits appear in your bank account statement, typically, with the description as ‘ACH/Company name.’

If there is a discrepancy in the bank account details, then the dividend does not get credited. “If there is a change in the bank account details, then investors need to update the same in the records of the depository participant,” says Narendra.

Bank account details include the name of the account holder, account number, IFSC code and MICR code. These can be found on the cheque leaf issued by the bank. There can be many reasons behind a discrepancy. “In case of merger of two banks, the bank details may change. When a branch is merged with another branch of the same bank, though the bank account number remains the same, the IFSC code changes and that may cause non-credit of dividend,” says Prafull Pophali, financial planner at Mumbai-based SMS Financial Services.

Check if your bank details are up-to-date in the records of your demat account.

What you must do

If the company fails to credit the dividend in your bank account, the company sends a physical cheque. If the same is lost in transit or if you have not updated your address, you may not receive it. Despite being a shareholder, if you are not paid the dividend, then it is the time to approach the RTA with your demat account details. RTA details are mentioned on the company’s website and also on the stock exchanges. Your broker can help you find the RTA of the company. Unpaid dividends are held in a separate account by the company for seven years and afterwards transferred to the investor education and protection fund.
Nikhil Walavalkar
first published: Dec 26, 2019 08:28 am

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