Existing shareholders of a company's stock receive notification, typically by mail, when the company declares a dividend payment. Included in the information, along with the amount of the dividend, the record date, and the payment date is the ex-dividend date. Investors who do not already own shares of a company's stock can find weekly listings of upcoming ex-dividend dates through financial and investment information websites, such as Barrons.com.
There are three important dates involved with the process of a company paying a dividend: the declaration date, the ex-dividend date, and the record date.
The Declaration Date
The declaration date is when a company's board of directors announces that the company will be paying a dividend. In the declaration, the company discloses the amount of the dividend and the ex-dividend, record and payment dates. Companies often issue dividend declarations on a regular quarterly, semi-annual or annual schedule. Dividend declarations often accompany earnings announcements.
Existing shareholders receive the declaration information directly from the company, usually by a notice in the mail. Investing information websites regularly publish upcoming ex-dividend dates, along with the amount of the dividend.
The Ex-Dividend Date
The ex-dividend date is the critical date that determines who qualifies to receive the dividend. To receive the dividend, investors must purchase the stock no later than the day before the ex-dividend date. Before trading begins on the ex-dividend date, the share price is reduced by the exchange in the amount of the dividend. Beyond that point, the stock is trading ex-, or without, the dividend. The ex-dividend date in the United States is two business days prior to the record date.
The Record Date
The record date is simply the date when the company officially records the stockholders who are eligible to receive the dividend – the shareholders who purchased the stock prior to the ex-dividend date.
The Payment Date
The final date associated with dividend payments is the payment date, the date when the company pays the dividend. The payment date typically follows the ex-dividend date by about a month.