Due Bill

AAA

DEFINITION of 'Due Bill'

A financial instrument used to document and identify a stock seller's obligation to deliver a pending dividend to the stock's buyer. A due bill is also used when the stock's buyer is obligated to deliver a pending dividend to the stock's seller. Due bills function as promissory notes and resolve the problem of ensuring that the correct owner receives a stock's dividend when the stock is traded near its ex-dividend date. Due bills can be used in a similar fashion when a company issues rights, warrants or stock splits.

INVESTOPEDIA EXPLAINS 'Due Bill'

For example, a buyer that purchases a stock ex-dividend, but before the dividend is actually paid, would provide a due bill to the seller stating that the dividend payment belongs to the seller. On the other hand, if a buyer purchases a stock before the ex-dividend date, he or she would be entitled to the dividend, but if he or she is not listed as the owner on the record date, the seller would receive the dividend. Because the buyer is the rightful recipient of the dividend, the seller would issue a due bill to the buyer.

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. Physical Delivery

    Term in an options or futures contract which requires the actual ...
  4. Delivery Notice

    A notice written by the holder of the short position in a futures ...
  5. Dividend Signaling

    A theory that suggests company announcements of an increase in ...
  6. Ex-Dividend

    A classification of trading shares when a declared dividend belongs ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. Which retail stocks pay the highest dividends?

    The retail sector consists of diverse groups of companies that specialize in pure online retail sales, brick-and-mortar retail ... Read Full Answer >>
  4. How can the price of a stock change on the ex-dividend date?

    An investor looking for a dividend-paying stock has two important dates to consider when investing in a company. The first ... Read Full Answer >>
  5. How is the ex-dividend date for a dividend on a stock determined?

    The ex-dividend date is actually determined by the appropriate stock exchange, not by the company paying the dividend. The ... Read Full Answer >>
  6. What is the average annual dividend yield of companies in the automotive sector?

    As of May 2015, using trailing 12-month data, the annual dividend yields of industries in the automotive sector are 1.01% ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  2. Professionals

    Investigating The Securities Police

    Learn about the history of FINRA and how this organization protects investors.
  3. Investing Basics

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  4. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  5. Professionals

    Swim With The Sharks As A Stockbroker

    This job takes guts, hard work and a predator's instincts. Do you have what it takes?
  6. Investing Basics

    Got Dividends? Here's How to Reinvest Them

    Reinvesting dividends is almost always a good idea if you intend to hold your shares for the long term, and there are several ways to do it.
  7. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  8. Trading Strategies

    Dividend Versus Buyback: Which Is Better?

    Companies reward their shareholders in two main ways--by paying dividends or buying back shares. An increasing number of blue-chips are now doing both.
  9. Economics

    Do Interest Rate Changes Affect Dividend Payers?

    Interest rate changes have an effect on prices of dividend-rich stocks in interest rate sensitive sectors like utilities, pipelines, telecommunications and REITs.
  10. Investing Basics

    The Risks of Chasing High Dividend Stocks

    Dividend stocks offer enticing yields, but a lot can go wrong on the way to collecting that dividend payout.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
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!