What is meant by the term dividend dates?
For stocks that pay dividends, there are few important dates that investors need to track. Existing shareholders and prospective investors can increase their gains by learning more about the dividend dates. Key dividend dates include declaration date, ex-dividend date, record date and date of payment.
- Dividend dates are important dates in the chronology of a dividend payment process.
- Important dividend dates include declaration dates, ex-dividend date, record date and payment date.
- The information on dividends dates helps gain through dividend stripping and cum dividends.
Frequently Asked Questions (FAQs)
What is the timeline for dividend payments?
The chronology of a dividend payment is as follows:
- The company declares dividends for a particular accounting period (quarter, half-year or full year). This date is called the announcement date.
- After this comes the ex-date. Also known as the ex-dividend date, it is the cut-off date beyond which any share purchase will not entitle the new holder for the current dividend announcement.
- After the ex-date, the list of shareholders eligible for receiving dividends is finalised on the date of record. These shareholders are called shareholders of record.
- Finally, on the payment date, the company transfers dividends meant for the shareholder of record.
What is the importance of declaration date?
The declaration date or the announcement date refers to when the company announces its next dividend payment. Very often declaration date is considered the least important because there is no action involved, there is only a communication meant to inform the investors. Although, in the case of options holders, the declaration date is also the expiration date. It is called the expiration date because it is the last date when the investor is supposed to inform if they want to exercise the option.
What is the importance of ex-dividend date?
The ex-Dividend date is the date on or after which the stock buyer is not eligible for a dividend if a stock is purchased. The dividend is instead paid to the shareholder who held the shares before the ex-dividend date. The ex-dividend date is followed by the record date.
What is the relevance of ex-dividend date for dividend stripping?
Dividend stripping is a strategy meant for short term gains. Investors buy shares after the announcement date and sell the shares soon after. However, dividend stripping is beneficial only if the shares are bought before the ex-dividend date.
What is the record date?
Record date, also known as the date of record, is the cut-off beyond which the shareholders who buy the shares are not eligible to receive a dividend. The record date is important because if any shareholders buy the shares after the ex-dividend date, their name does not appear on the database created on the record date. Instead, the dividend payment will only be to the shareholders whose database is recorded on the record date. For all the companies across stock exchanges, the record date is set after the ex-dividend date. It is worth noting that while the record date is set by the board of directors of a company, the ex-dividend date depends on the rules of the stock exchange on which the company trades.
What is the record date and ex-dividend date as per ASX?
As per the Australian Securities Exchange, the ex-dividend date is set one business day before the date of record.
What is the date of payment?
The payment date is the date on which the declared dividend is paid. On this date, the company pays a dividend to shareholders who are eligible as per the record date. The payment date follows a few weeks after the ex-dividend date. The payment date for the dividend can be up to a month after the ex-dividend date. On the payment date, the companies usually disburse the amount to the brokers of the shareholder and not the shareholder directly. It is the broker who transfers the amount to the shareholders' account. Some brokers maybe even given instructions to reinvest the received amount. If the dividend is an interim dividend, then the payment must be made 30 days within the announcement, but if the dividend is a final dividend, then the payments must be made in 30 days following the annual general meeting.