A:

When a dividend is declared, there are three important dates for investors: the dividend payable date, the dividend date of record and the ex-dividend date.

The dividend payable date is the date that the company will actually make the dividend payments that it has announced. The dividend record date is the date that determines which shareholders will receive the dividend - any shareholders on record on that date will be paid. However, as this date approaches, an ex-dividend date is used to ensure that no confusion exists about which shareholders are on record. The ex-dividend date is the second business day before the date of record. Anyone who purchases the stock on or after the ex-dividend date does not receive the dividend, and the dividend is subsequently paid to the shares' previous owner.

In general, this process is fairly simple for investors to track. However, sometimes after announcing a dividend and a dividend record date a company may decide to change the date. For example, assume company XYZ announces that it will pay a dividend on February 3 to shareholders on record as of Friday, January 15. With this dividend record date, the ex-dividend date will be Wednesday, January 13. However, a week later, the company announces that it will push the record date forward to Thursday, January 25. Because the date of record has changed, the ex-dividend also changes, becoming Tuesday, January 23, the second business day before the new date of record.

To learn more, see Declaration, Ex-dividend And Record Date Defined, The Importance Of Dividends and The Power Of Dividend Growth.

RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  5. What is the average annual dividend yield of companies in the retail sector?

    According to data published by the NYU Leonard N. Stern School of Business, as of January 2015, the average annual dividend ... Read Full Answer >>
  6. What kind of companies in the utilities sector offer the most stable dividends for ...

    Among the companies that offer the most stable dividends for risk-averse investors are large, solidly established U.S.-based ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: First Trust Dow Jones Global Sel Div

    Find out about the First Trust Dow Jones Global Select Dividend Index Fund, and learn detailed information about characteristics and suitability of the fund.
  2. Investing Basics

    Understanding How Dividends Are Taxed

    Learn how dividends are taxed by the IRS, and understand the different types of dividend income as well as the capital gains tax rates.
  3. Investing Basics

    6 Reasons Why Dividends Should Be Reinvested

    Learn about the advantages of dividend reinvestment programs and how they may benefit longer-term investors who want to build a position in a company.
  4. Options & Futures

    Understanding How Dividends Affect Option Prices

    Learn how the distribution of dividends on stocks impacts the price of call and put options, and understand how the ex-dividend date affects options.
  5. Mutual Funds & ETFs

    ETF Analysis: Utilities Select Sector SPDR

    Learn about the Utilities Select Sector SPDR ETF and the benchmark index it tracks, and understand what type of investors may be interested in the fund.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares International Select Dividend

    Learn how the iShares International Select Dividend ETF provides investors an opportunity to gain exposure to high-quality companies outside the United States.
  7. Investing Basics

    How Do You Find Penny Stocks That Pay Dividends?

    Learn about how investors can use online stock screeners to obtain a list of dividend-paying penny stocks for their consideration.
  8. Investing News

    Understanding How Mutual Funds Pay Dividends

    The process by which mutual fund dividends are calculated, distributed and reported is fairly straightforward in most cases. Here's a look.
  9. Investing Basics

    Understanding the Modigliani-Miller Theorem

    The Modigliani-Miller (M&M) theorem is used in financial and economic studies to analyze the value of a firm, such as a business or a corporation.
  10. Fundamental Analysis

    Bet on this U.S. Automaker for Long-Term Gains

    Ford holds a stronger technical position than General Motors and also pays a consistent dividend. This combination could mean greater 3-to-5-year returns.
RELATED TERMS
  1. Record Date

    The cut-off date established by a company in order to determine ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through ...
  3. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  4. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  5. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!