A:

From an accounting point of view, shareholders' equity is decreased by the total dividend amount on the date it is declared by a company's board of directors (B of D). An offsetting "dividends payable" entry is made into the account on the same date. When the dividend is finally paid to shareholders, the account is zeroed out and the company's cash balance is decreased by a corresponding amount.

Divided dates can be some of the most confusing aspects of owning stocks and tracking companies. However, investors should take note of four important dates: the declaration date, the date of record, the ex-date and the payable date.

The declaration date, as mentioned above, is the date a company's board of directors decides to pay a dividend. The date of record is the date by which investors must own the shares of stock in order to become eligible for the upcoming dividend. The ex-date is the date on which the stock trades lower than the amount of the dividend to be paid. The payable date is the date on which the dividend is mailed out or deposited to clients' accounts.

(For more on this topic, read Declaration, Ex-Dividend and Record Date Defined and Stock Basics: Different Types of Stock.)

This question was answered by Ken Clark.

RELATED FAQS
  1. Why should I pay attention to a dividend's ex-dividend date?

    Understand the importance of the ex-dividend date as the critical date for determining which stockholders qualify to receive ... Read Answer >>
  2. How and when are stock dividends paid out?

    A dividend is determined quarterly after a company finalizes its income statement. Read Answer >>
  3. What is the difference between record date and payable date?

    Learn how to ensure receiving stock dividends by the payment date on record and important dates to keep track of pertaining ... Read Answer >>
Related Articles
  1. Investing

    How Dividends Affect Stock Prices

    Find out how dividends affect the price of the underlying stock, the role of market psychology and how to predict price changes after dividend declaration.
  2. Investing

    How To Use The Dividend Capture Strategy

    Dividend capture strategies provide an alternative investment approach to income seeking investors.
  3. Investing

    Understanding Taxes on Mutual Funds Dividends

    Learn about the basics of mutual fund dividend taxation, including how and why mutual funds pay dividends and when different tax rates apply to dividend income.
  4. Investing

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.
  5. Investing

    3 Dividend Trends in the S&P 500 Index (TSN, LUV)

    Analyzing recent financial performance of companies demonstrating an inclination to issue consistent dividends to shareholders on a quarterly basis.
  6. Investing

    Which Is Best: Cash Dividend Or Stock Dividend?

    Cash dividends are paid to shareholders when a company decides not to use the money for operations, but instead, transfer economic value to its shareholders.
  7. Investing

    The Truth About Dividends

    Dividends may seem like money for nothing, but they have several implications.
  8. Financial Advisor

    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. Trading

    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.
RELATED TERMS
  1. Payment Date

    The date on which a declared stock dividend is scheduled to be ...
  2. Declaration Date

    1. The date on which the next dividend payment is announced by ...
  3. Ex-Date

    The date on or after which a security is traded without a previously ...
  4. Record Date

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

    A dividend that is owed to stockholders of record but has yet ...
  6. Cash Dividend

    Money paid to stockholders, normally out of the corporation's ...
Hot Definitions
  1. Current Assets

    A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within ...
  2. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  3. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  4. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  5. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  6. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
Trading Center