1. Introduction To Dividends: Introduction
  2. Introduction To Dividends: Terms To Know And Other Basics
  3. Introduction To Dividends: Dividend Dates
  4. Introduction To Dividends: Investing In Dividend Stocks
  5. Introduction To Dividends: Doing Your Homework And Taxes
  6. Introduction To Dividends: Conclusion

A company’s Board of Directors must declare all dividends. Four dividend-related dates are important to this process:

Declaration Date

The declaration date is the date the dividend is announced by the Board of Directors. The declaration statement includes the size of the dividend, the date of record and the payment date (see below). Once a dividend is declared, the company has a legal responsibility to pay it.

Record Date (or Date of Record)

When a company announces a dividend, it sets a record date – the date you must be on the company’s books to receive the declared dividend. On the record date, the company determines its shareholders, or “holders of record,” and establishes who is sent financial reports, proxy statements and other information.

Ex-Dividend Date (or Ex-Date)

After the company sets the record date, the ex-dividend date is set in accordance with stock exchange rules. If you buy the stock before the ex-dividend date, you’ll receive the dividend – but if you buy on or after the ex-date, you won’t (in this case, the seller of the stock is entitled to the dividend). As an example, assume that stock ABC recently announced a cash dividend with an ex-dividend date of December 7. If you buy 100 shares of ABC on that date (or after), you won’t receive the dividend, but if you buy the shares on December 5 – before the ex-dividend date – you’ll be entitled to the next dividend. (For more, read Why Don’t Investors Buy Stock Just Before the Dividend Date and Sell Right Afterwards?)

The ex-dividend date is usually set one business day before the record date. A stock’s price may increase by the dollar amount of the dividend as the ex-date approaches. On the ex-dividend date, the exchange may reduce the price per share by the dollar amount of the dividend. [L3]

Payment Date (Payable Date)

The payment date is the scheduled date the company pays the declared dividend. Only shareholders who own the stock before the ex-dividend date are entitled to the dividend.

Here’s an example that shows the timeline for a dividend Coca-Cola paid in Oct. 2017:

 

Type

Declaration Date

Ex-Dividend Date

Record Date

Payment Date

Date

July 21, 2017

Sept. 14, 2017

Sept. 15, 2017

Oct. 2, 2017

Notes

KO announces a dividend.

The date before which you must own KO to be entitled to the dividend.

The date by which you must be on KO’s books as a shareholder to receive the dividend.

The date KO pays the dividend to shareholders.

 

Figure 2: Important dividend dates.


Introduction To Dividends: Investing In Dividend Stocks
Related Articles
  1. Investing

    Declarations, Ex-Dividends and Record Dates

    Understanding the dates of the dividend payout process can be tricky. We clear up the confusion.
  2. Investing

    How to use the dividend capture strategy

    Learn how to implement the dividend capture strategy, an aggressive, income-focused stock trading strategy investors can use to increase equity profits.
  3. Investing

    How Dividends Affect Stock Prices

    Find out how dividends affect the underlying stock's price, the role of market psychology, and how to predict price changes after dividend declarations.
  4. Investing

    Make ex-dividends work for you

    Learn what happens to the market value of a share of stock when it goes "ex" and why. Find out how to keep your dividends out of the tax man's hands.
  5. Investing

    Is Dividend Investing a Good Strategy?

    Understanding dividends and how they generate steady income for shareholders will help you become a more informed and successful investor.
  6. Investing

    AAPL: Apple Dividend Analysis

    Apple's dividend has had healthy growth ever since its 2012 reinstatement, thanks to Apple's continuously rising revenue, earnings and operating cash flow.
  7. Investing

    WMT: Wal-Mart Dividend Analysis

    Wal-Mart raised its dividend for the 43rd consecutive year, despite losing over 25% of its market value in 2015, and its dividend remains healthy in 2016.
  8. Investing

    Put Dividends to Work in Your Portfolio

    Find out how a company can put its profits directly into your hands.
  9. Financial Advisor

    Coca-Cola Stock: A Dividend Analysis (KO)

    Discover analysis of The Coca-Cola Company's dividend policy, and learn about the dividend policies of its competitors, PepsiCo and Dr Pepper Snapple.
Trading Center