Key dates to remember regarding dividend payouts
Over 2 million + professionals use CFI to learn accounting, financial analysis, modeling and more. Unlock the essentials of corporate finance with our free resources and get an exclusive sneak peek at the first module of each course. Start Free
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
Thank you for reading CFI’s guide to the Important Dividend Dates. To keep advancing your career, the additional CFI resources below will be useful:
FAQs
There are four key dates to keep in mind when holding a dividend-paying stock:
- Declaration Date. The declaration date is the date on which the board of directors announces and approves the payment of a dividend. ...
- Ex-Dividend Date. ...
- Record Date. ...
- Payment Date.
To be eligible for the dividend, you must buy the stock no later than one day before the ex-date, which would mean two business days before the date of record. If you plan to sell your stock but wish to receive the dividend, don't sell it before the ex-dividend date.
What is 5% dividend rule? ›
Cash dividends are paid out either as a check sent to the investor or as a credit to a brokerage account, which can then be reinvested. Stock dividends are paid in fractional shares. If a company issues a stock dividend of 5%, shareholders will receive 0.05 shares in dividends for every share they already own.
What is the 25 special dividend rule? ›
Special Dividends
If the dividend is 25% or more of the stock value, special rules apply to the determination of the ex-dividend date. In these cases, the ex-dividend date will be deferred until one business day after the dividend is paid.
What is the 45 day rule for dividends? ›
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.
Is it better to buy before or after the ex-dividend date? ›
The stock price drops by the amount of the dividend on the ex-dividend date. Remember, the ex-dividend date is typically the same day as the record date. If investors want to receive a stock's dividend, they have to buy shares of stock before the ex-dividend date.
What is the 4% dividend rule? ›
The 4% rule is intended to supply a steady stream of income while maintaining an adequate account balance for future years. Assuming a reasonable rate of return on investment, the withdrawals will consist primarily of interest and dividends. Experts disagree on whether the 4% rule is the best option.
What is the 60 day dividend rule? ›
A dividend is considered qualified if the shareholder has held a stock for more than 60 days in the 121-day period that began 60 days before the ex-dividend date.2 The ex-dividend date is one market day before the dividend's record date.
What is the effective date of a dividend? ›
Effective Date Dividend means the dividend payment declared and made by Borrower to Parent on the Effective Date to fund a portion of the consideration (including Transaction Costs) in connection with the consummation of the Acquisition and the related Transactions.
What is 2% dividend rule? ›
To decide whether the dividend is "extra-ordinary" (i.e. which are at and above 2% of the market price of the underlying stock.), the market price would mean the closing price of the scrip on the day previous to the date on which the announcement of the dividend is made by the Company after the meeting of the Board of ...
And you don't have to be a millionaire to take advantage of this strategy. A $500K nest egg will create a still appetizing $39,965.51 in annual income. A delectable dividend meal. The important thing is that these yields are safe, which creates stability for the stock (and fund) prices attached to them.
Which stock gives the highest dividend in the world? ›
World's companies with the highest dividend yields
| Symbol | Exchange | Div yield % (indicated) |
|---|
| NHMD D | OTC | 1,000.00% |
| PVMCF D | OTC | 560.19% |
| TAPARIA D | BSE | 502.51% |
| MMLMGL D | EURONEXT | 426.12% |
27 more rowsTo generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
What are the four important dates surrounding a dividend? ›
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. On the ex-dividend date, stock prices typically decline by the amount of the dividend.
What is the new dividend rule? ›
Dividend payout ratio cap:
40% if net NPA is less than 1% 35% if net NPA is greater than or equal to 1% but less than 2% 25% if net NPA is greater than or equal to 2% but less than 4% 15% if net NPA is greater than or equal to 4% but less than 6%
What should be the record date for dividend? ›
Record date, also known as the cut-off date, is the specific day on which a company finalises the list of shareholders eligible for its forthcoming dividend distribution. An organisation whose stocks are actively traded in the stock market expects to see a constant flux in the list of shareholders.
Which date is considered for dividends? ›
The record date is a day on which a company determines which shareholders are eligible to receive the announced dividend payment. Shareholders' names that appear on a company's record at the end of a record date are considered for dividend payment.
What is the significant date with respect to dividends? ›
Stock dividends have key dates that investors must understand otherwise they will miss out on payments. The three dates are the date of declaration, date of record, and date of payment. The date of declaration is when the company's board of directors announces their intention to pay a cash dividend.
What do the dates mean for dividends? ›
This is the date that a company announces it is paying a dividend. A declaration statement is issued which includes details such as the size of dividend, the record date and the payment date. Ex-Dividend Date (or Ex-Date) In order to receive the next scheduled dividend, you must own the stock before this date.
