A dividend is a payment made by a company to its shareholders, usually in cash or additional shares of stock. It comes from the company's profits or retained earnings and a way to reward the shareholders for their investment in the company. 

Impact of Dividend on stocks - Dividends can directly affect the stock price. When a dividend is announced, the stock price usually goes up, but it can go down after the ex-dividend date. Typically, the stock price drops by the amount of the dividend. The size of the dividend, the company's financial health, and market conditions all play a role in how the stock price moves. Read more here.

Impact of Dividend on F&O - The adjustment process in F&O contracts depends on whether the declared dividend is classified as an ordinary dividend or an extraordinary dividend. If the dividend is below 2% of the market value of the underlying stock, it is considered an ordinary dividend, and no adjustment is made to the strike price. However, if the dividend exceeds 2% of the market value then it is considered an extraordinary dividend, and the strike price of the F&O contract and the futures price are adjusted. We have explained this more in detail here.