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. What are the main factors that drive share prices in the utilities sector?

    Learn why the share prices of companies in the utility sector have sensitivity to interest rates and to changes in the amount ...
  2. Which retail stocks pay the highest dividends?

    Learn which retail stocks pay the highest dividends as measured in terms of dividend yield and why investors need to carefully ...
  3. What dividend yield is typical for the airline sector?

    Learn what dividend yield is typical for the airline sector. The airline business tends to be victim to economic growth and ...
  4. How does the risk of investing in the utilities sector compare to the broader market?

    Learn about the risks of investing in the utilities sector compared to the broader market. Utilities are less exposed to ...
RELATED TERMS
  1. Record Date

    The cut-off date established by a company in order to determine ...
  2. Dividend

    A distribution of a portion of a company's earnings, decided ...
  3. Target Payout Ratio

    A target payout ratio is a measure of what size a company's dividends ...
  4. Policyholder Dividend Ratio

    The policyholder dividend ratio is a measurement of the profitability ...
  5. Paid-Up Additional Insurance

    Additional whole life insurance that a policyholder purchases ...
  6. Accelerated Dividend

    Special dividends paid by a company ahead of an imminent change ...

You May Also Like

Related Articles
  1. Stock Analysis

    Why Hasn't McDonald's Beaten The Dow ...

  2. Investing Basics

    Four Buy and Hold Stocks for Millennials

  3. Mutual Funds & ETFs

    ETF Dividends: The Lowdown on How They're ...

  4. Stock Analysis

    Microsoft Is Paying Dividends. Is Its ...

  5. Fundamental Analysis

    How Private Equity Dividends Work

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!