How dividends work

What a dividend is

When a listed company makes a profit, it can share some of it with the people who own it. That payout is a dividend, quoted per share: a ₦2.50 dividend means ₦2.50 for every share you hold. The board proposes it and shareholders approve it at the annual general meeting. Some companies also pay interim dividends during the year without waiting for the AGM.

The four dates that matter

Declaration date: the company announces the dividend and the timetable.

Ex-div date: the cutoff. Own the stock before this date and the dividend is yours; buy on or after it and you miss out. The price usually opens lower by about the dividend amount that morning, which is normal, not a crash.

Qualification (register closure) date: the company closes its shareholder register a few days after ex-div. Only names on it get paid.

Payment date: weeks later, the cash is paid out, usually through your broker or directly to your bank account if you have an e-dividend mandate.

Read what is ex-div? for the full breakdown of the cutoff mechanics.

The 10% tax

Nigeria takes 10% withholding tax on dividends at source, before the money reaches you. It is deducted automatically and for most individual investors that is the end of the tax story: no extra filing on the dividend itself. So a ₦2.50 dividend on 1,000 shares is ₦2,500 gross and ₦2,250 net in your pocket.

How the money reaches you

Dividends are paid through the company's registrar (names like Meristem Registrars or CardinalStone Registrars handle this for many listed firms). If your bank details are registered for e-dividend, the net amount lands straight in your account on payment day. If not, the money sits as an unclaimed dividend: contact the registrar with your CHN to claim it.

Dividend yield: is it generous?

The dividend yield tells you what the payout means relative to the price: annual dividend per share divided by the share price. A ₦5 yearly dividend on a ₦100 stock is a 5% yield. High yields look attractive, but check the dividends page for whether the payout has been steady or is shrinking.

A worked example

You own 2,000 shares of a company paying ₦4.00 per share. Gross dividend: 2,000 x ₦4.00 = ₦8,000. Withholding tax at 10%: ₦800. You receive ₦7,200. You qualified because you bought before the ex-div date and held through it.

What to watch out for

Chasing dividends: buying the day before ex-div just for the payout rarely works, because the price already reflects the coming dividend and drops by about that amount on ex-div morning.

Scrip dividends: some companies offer extra shares instead of cash. Same value idea, different form: you get more shares rather than naira.

Cuts happen: dividends are never guaranteed. A company can reduce or skip them when profits fall, so treat the yield as information, not a promise.

Track upcoming qualification dates on the dividends page and full timetables on the corporate actions page.