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Important Dividend Dates

Key dates to remember regarding dividend payouts

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.

 

Important Dividend Dates

 

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 at which the board of directors announces and approves the payment of dividend. The declaration date 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 trades in. 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 at 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, before the ex-dividend date, would be entitled to a dividend because the trade would settle on November 30, at which the investor would be on the company’s books on the record date.

 

4. Payment Date

The payment date is the date at 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

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Accelerated Dividend
  • Capital Gains Yield
  • Dividend Discount Model
  • Special Dividend

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