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 ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
The record date is the day on which you must be on the company's books as a shareholder to receive the declared dividend. The payment date is the day the company pays the declared dividend to shareholders who own the stock before the ex-date.
The three relevant dates involving cash dividends are the declaration date, date of record, and payment date.
The ex-date is usually the day before the record date and it determines which shareholders are entitled to a payment. The payment date is the day when dividend payments are made. An investor must be a shareholder before the ex-date in order to collect dividends.
Key Takeaways
There are four dates to know when it comes to companies' dividends: the declaration date, the ex-dividend date, the record date, and the payable date.
The Growing Power of Dividends
The ex-dividend date is two business days before the record date when the shares begin to trade without their dividend. If you buy stocks one day or more before their ex-dividend date, you will still get the dividend. That's when a stock is said to trade cum-dividend, or with dividend.
The ex-dividend date is generally set two business days before the record date record date. It is a general rule that you must hold the stocks of the company before the ex-dividend date to be eligible for receiving the dividend amount.
(3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.
The divisibility rule of 3 states that if the sum of digits of a number is a multiple of 3, the number will be completely divisible by 3.
Those who sell before the ex-dividend date will not receive any dividend payments. If an investor decides to sell after the ex-dividend date, they will receive whatever the current dividend payment is, although they are not entitled to receive future payments unless they buy shares again.
Cash dividends
These are the most common types of dividends and are paid out by transferring a cash amount to the shareholders.
If you own shares in a company, you may receive a dividend or distribution. In any income year you may receive both an interim and a final dividend. In most circumstances, you will be liable to pay income tax for that income year on the dividends you are paid or credited.
(1) A company must not pay a dividend unless: (a) the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and (b) the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and (c) the payment ...
The 45 day rule (sometimes called dividend stripping) requires shareholders to have held the shares 'at risk' for at least 45 days (plus the purchase day and sale day) in order to be eligible to claim franking credits in their tax returns.
Briefly, in order to be eligible for payment of stock dividends, you must buy the stock (or already own it) at least two days before the date of record and still own the shares at the close of trading one business day before the ex-date.
The ex-dividend date occurs one business day before the company's record date. To be entitled to a dividend a shareholder must have purchased the shares before the ex-dividend date. If you purchase shares on or after that date, the previous owner of the shares (and not you) is entitled to the dividend.
The stock price adjusts to the dividend paid out as opportunity lost and analysts calculate this as the ex-dividend price of the stock. For instance, IDFC Ltd announced an interim dividend of Rs 11 per share and its share price reduced by Rs 13 on the payout day.
While the dividend history of a given stock plays a general role in its popularity, the declaration and payment of dividends also have a specific and predictable effect on market prices. After the ex-dividend date, the share price of a stock usually drops by the amount of the dividend.
Moreover, dividends should be understood more as a distribution than an income as they tend to drop by almost the same value as the dividend. A dividend is just a capital transfer from the company to the shareholders. That's why stocks drop on the ex-dividend date.
Skip the Ex-Dividend Date for Stock Appreciation
Remember that the market will discount the underlying share price on the ex-dividend date. This means you get the shares cheaper with more upside as dividend stocks tend to recover their dividend gaps in the long run.
Declaration date: The first entry on the dividend calendar is the declaration date, which usually occurs at least a week before the ex-dividend date. On the declaration date, the company's board sits down and determines how much of its quarterly net profits will return to shareholders.
Key Dividend Dates
The declaration date is the date on which a company officially commits to the payment of a dividend. The ex-dividend date, or ex-date, is the date on which a stock begins trading without the dividend. To receive the declared dividend, shareholders must own the stock prior to the ex-dividend date.
While the ex-dividend payment date ideally comes two days before the record date, there are some instances where the stock exchange may release it later. This exception occurs when the company declares a dividend of more than 25% of the stock's value.