Due Bill

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.

BREAKING DOWN '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. A classification of trading shares when a declared dividend belongs ...
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 News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  7. Stock Analysis

    The 5 Best Stocks That Pay Monthly Dividends (PSEC, LTC)

    Get the scoop on five of the best stocks that pay regular monthly dividends, offering investors looking for regular income dividend yields of up to 16%.
  8. Investing Basics

    How And Why Do Companies Pay Dividends?

    The arguments for dividends include the idea that a dividend provides certainty about a company’s well being.
  9. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  10. Stock Analysis

    Qualcomm Stock: A Dividend Analysis (QCOM)

    Read an analysis of Qualcomm, Inc. and its dividends, which are poised to increase in the future due to the growing mobile device market.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center