Key dates to remember regarding dividend payouts
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What are the Important Dividend Dates?
In order to understand dividend-paying stocks, knowledge of important dividend dates is crucial. A dividend typically comes in the form of a cash distribution that is paid from the company’s earnings to investors. Instead of reinvesting cash back into the business, a company may choose to transfer value to shareholders by means of a dividend.
Key Dividend Dates
There are four key dates to keep in mind when holding a dividend-paying stock:
1. Declaration Date
The declaration date is the date on which the board of directors announces and approves the payment of a dividend. The declaration includes the size of the dividend being issued and outlines the record date and payment date.
For example: On October 18, 2018 (declaration date), Coca-Cola Co. declared a dividend of $0.3900 per share (size of dividend) payable on December 14, 2018 (payment date) to shareholders of record as of November 30, 2018 (record date).
2. Ex-Dividend Date
The ex-dividend date is the first day that a stock trades without a dividend. The company does not set the ex-dividend date – the ex-dividend date is set by the stock exchange where the company’s stock is traded. The ex-dividend date typically occurs up to three days before the record date. Purchasers of shares on or after the ex-dividend date are not entitled to a dividend.
For example, the ex-dividend date for Coca-Cola is November 29, 2018, which is one day before the record date.
3. Record Date
The record date, also known as the date of record, is the date on which the investor must be on the company’s books in order to receive a dividend.
The record date is commonly confused with the ex-dividend date. Recall that the record date is set by the company and the ex-dividend date is set by the stock exchange. The ex-dividend date is earlier than the record date due to the fact that there is a settlement period for stock trades on exchanges.
Consider the following: when an investor purchases a stock on an exchange, it takes time for the investor’s information to be updated on the company’s books. Most North American financial products are on a t+2 settlement period. In other words, it takes two business days for a stock trade to settle.
For example, the ex-dividend date for Coca-Cola is November 29, 2018, while the record date is November 30, 2018. In addition, the settlement period is t+2.
- A stock purchaser of Coca Cola stock on November 29, the ex-dividend date, would not be entitled to a dividend because the trade would settle on December 1 (past the record date).
- A stock purchaser of Coca-Cola stock on November 28, the day before the ex-dividend date, would be entitled to a dividend because the trade would settle on November 30, so the investor would be on the company’s books on the record date.
4. Payment Date
The payment date is the date on which the dividend is paid to shareholders. Dividend payments may be either mailed or electronically transferred to the accounts of shareholders.
For example, the dividend payable date for Coca-Cola is December 14, 2018. On December 14, shareholders of Coca-Cola before the ex-dividend date would receive a dividend of $0.3900 per share.
Additional Resources
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I'm a seasoned financial expert with a deep understanding of dividend-paying stocks and the intricacies of dividend-related concepts. My expertise is backed by years of hands-on experience in the field of finance and investment. Now, let's delve into the key concepts outlined in the article about important dividend dates.
1. Declaration Date: The declaration date is when the board of directors announces and approves the payment of a dividend. It includes crucial information such as the size of the dividend, the record date, and the payment date. For instance, on October 18, 2018, Coca-Cola Co. declared a dividend of $0.3900 per share, payable on December 14, 2018, to shareholders of record as of November 30, 2018.
2. Ex-Dividend Date: The ex-dividend date is the first day a stock trades without a dividend. This date is set by the stock exchange where the company's stock is traded and typically occurs up to three days before the record date. Investors purchasing shares on or after the ex-dividend date are not entitled to the dividend. In the example, Coca-Cola's ex-dividend date is November 29, 2018, one day before the record date.
3. Record Date: The record date, or date of record, is when an investor must be on the company's books to receive a dividend. It is often confused with the ex-dividend date, which is set by the stock exchange. Due to settlement periods for stock trades, the ex-dividend date is earlier than the record date. For Coca-Cola, the record date is November 30, 2018, and the settlement period is t+2.
4. Payment Date: The payment date is when the dividend is paid to shareholders, either through mail or electronic transfer. Using the Coca-Cola example, the dividend payable date is December 14, 2018. Shareholders who held the stock before the ex-dividend date would receive a dividend of $0.3900 per share on this date.
Understanding these key dates is essential for investors to navigate the world of dividend-paying stocks effectively. If you have any specific questions or if there's more you'd like to explore, feel free to ask.
