What is a 'Payment Date'

A payment date is the date on which a declared stock dividend is scheduled to be paid.

BREAKING DOWN 'Payment Date'

Only those shareholders who bought the stock before the ex-dividend date receive the dividend on the date of payment (payable date).

How the Payment Date Fits Into the Issuance of Dividends

The process and cycle of dividend payments typically follows a set pattern. The company’s board of directors will make an announcement declaring the parameters of the next dividend payment to be issued. This known as the announcement date or declaration date for the dividend.

When the declaration is made, the company will also determine a record date, also known as the date of record, which indicates the deadline for a shareholder to be recorded on the books in order to qualify for the dividend. Usually this also coincides with who the company also issues such material as financial reports and proxy statements to.

This step usually includes the company setting the ex-dividend date, which is determined by the rules of the respective stock exchange it is listed on. New shareholders who first purchase stock on the ex-dividend date or after do not qualify for that next dividend payment to be issued. The ex-dividend date in many cases is set one business day prior to the date of record.

The payment date for the dividend may be up to one month after the ex-dividend date passes. When the payment date arrives, the company will issue the payment usually to the broker serving the stockholder. The dividend will then be transferred to the respective shareholder.

There can be changes in a company’s stock price on the payment date for dividends, which investors may look to as an indicator of how the market values the security. Other investors, who did not qualify for the dividend, might buy or sell shares as the payment date approaches. This could lead to the share price remaining elevated despite the issuance of a dividend.

The potential exists for stock prices to decline because the value of a company is decreased based on the full sum of the dividends since the payment is drawn from profits and reserves. There is some expectation for share prices to decrease in equal amounts to the dividend to show this reduction in value. This may not be the case as other factors can come into play that influence the stock price to a greater extent than a dividend payment. If a company sees its share prices remain the same or increase on or after a payment date, it can indicate there is higher market demand for the stock.

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