What Are Declaration, Record, Ex-dividend, Payment Dates? The Most Important Dividend Dates Explained
In this article, I will explain in simple words the most important dividend dates. Everybody who invests in dividend paying stock must know what each date mean and how it is used by investors. There are 4 important dates: declaration date, date of record, ex-dividend date, payment date. Here are some details about each and if you still don’t understand them, you can check out the example below.
What These Dates Actually Mean
Declaration date – this is when the board of directors declare that the company is going to pay a dividend to its shareholders. This declaration includes information about the exact amount of the dividend, the record date (see below) and the date when the dividend will be paid (the payment date).
Date of record – this is the date before which you must be in the company’s shareholders book, in order to receive the dividend. This date is determined by the company and it is used to determine the most important date for a dividend paying stock – the ex-dividend date. Please note, that this is not the date up to which you must buy shares to get the dividend. For example, if the date of record is 01.01.2015, this doesn’t mean that if you purchase shares a day before this date you will catch a dividend payment. This is because each stock purchase needs a few days to be settled, depending on the exchange it is traded. This is why you need the ex-dividend date.
Ex-dividend date – this is the most important date for the shareholder, it tells who exactly catches the current dividend payment. If you buy or own the shares BEFORE this date, you GET the dividend. If you buy or own shares ON or AFTER this date – you MISS the current dividend payment. This date is determined by the exchange the stock is traded on and it’s based on the date of record (date of record – days for settlement). This is the first date the shares are traded without the current dividend payment. Note that if you sell your stocks on this date, you will still get the dividend payment, because you owned the stocks before this date.
Payment date – this is the date when the dividends are actually paid to the shareholder by the company. All shareholders that owned the stock before the ex-dividend date get paid.
Today is 07.09.2015, you have 100 shares of a company called DIV. The DIV company announces its next dividend payment on 15.09.2015 (declaration date). DIV declares that they will pay $1.10 dividend with record date 10.10.2015 and payment date 01.11.2015. The ex-dividend date is 08.10.2015 (two days before the record date, because of 2 days settlement).
This means, that if you hold your shares up to the ex-dividend date (in our case 08.10.2015), you will get a dividend payment of $110 (100 shares X $1.10 dividend per share). If you sell your shares on the ex-dividend date, you will still get the payment, if you sell your shares before the ex-dividend date, for example on 07.10.2015 – you miss the payment.
This is it. It’s really simple, actually, you must pay the biggest attention to the ex-dividend date, because it actually determines who does get a dividend and who does not.
Here is some real example of how Royal Dutch Shell company announces its dividend (from their site):
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