Dividends

Dividends are payments from a corporation to stockholders. Corporations may issue cash dividends, stock dividends, or choose to issue no dividend at all.
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Dividends are typically paid quarterly. If a corporation elects to pay a dividend, shareholders will receive cash, or occasionally stock, for each share owned. Dividends are paid at the discretion of the company’s board of directors and the amount may increase or decrease from quarter to quarter.

Dividend yield refers to the percentage return a stockholder receives in dividends relative to the current stock price. The dividend yield is calculated by dividing dividends per share by market price per share. For example, if the share price is $50 and the dividend paid is $1.00, the dividend yield would be 2%.

Declaration Date

The declaration date is the day a corporation declares or announces an upcoming dividend payment to stockholders. The amount of the dividend, the record date, and the payment date are announced on the declaration date.

Ex-Dividend Date

The ex-dividend date is the day a security begins trading without the value of the next dividend. To receive the upcoming dividend payment, the stock must be purchased or owned before the ex-dividend date.

On the ex-dividend date, new purchasers of the stock are no longer entitled to receive the recently declared dividend. Purchasers of stock on or after the ex-dividend date own the stock but do not receive the declared dividend. If a stock is purchased on the ex-dividend date, the dividend payment goes to the seller instead of the buyer.

The share price of a stock typically goes down by the dividend amount on the ex-dividend date to reflect that new purchases of the stock do not get the declared dividend. The ex-dividend date is before the record date.

Record Date

The record date (or holder of record date) is the day set by the corporation to determine who is entitled to receive the declared dividend payment. To receive the dividend payment, a stockholder must own the stock as of the record date and the ex-dividend date.

The record date is after the ex-dividend date and before the payment date.

Payment Date

The payment date is the day on which stockholders of record will receive his or her dividend payment.

For example, a company announces a dividend on the declaration date. To receive the dividend, the stock must be purchased before the ex-dividend date. Shareholders as of the date of record are entitled to the dividend payment.

The dividend is paid on the payment date. A stock with a holder-of-record date of June 4 will go ex-dividend on June 2. To receive the dividend, the stock must be purchased by June 1. The dividend payment date is June 15 to stockholders of record.

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FAQs

How do dividends work?

Dividends are payments from a corporation to stockholders. Corporations may issue cash dividends, stock dividends, or choose to issue no dividend at all. If a corporation chooses to pay a dividend, shareholders will receive cash, or occasionally stock, for each share owned.

For example, if a company pays a $.50 dividend, and a shareholder owns 100 shares of stock, they will receive $50. Dividends are paid at the discretion of the company’s board of directors and the amount may increase or decrease from quarter to quarter. Shareholders must own the stock before the ex-dividend date to receive the dividend.

What is the difference between the declaration date and the record date?

The declaration date is the day a corporation declares or announces an upcoming dividend payment to stockholders. The amount of the dividend, the record date, and the payment date are announced on the declaration date. 

The record date (or holder of record date) is the day set by the corporation to determine who is entitled to receive the declared dividend payment. To receive the dividend payment, a stockholder must own the stock as of the record date and the ex-dividend date. The record date is after the ex-dividend date and before the payment date. 

Will I get the dividend if I buy the stock on the record date?

No. The stock must be purchased prior to the record date to receive the dividend. 

How long do I have to own a stock to get the dividend?

Most stock trades have a settlement that occurs two days after the transaction. Therefore, a stock must be purchased the day before the ex-dividend date.

What happens to the stock price on the ex-dividend date?

The share price of a stock typically goes down by the dividend amount on the ex-dividend date to reflect that new purchases of the stock do not get the declared dividend.

What is the difference between the ex-dividend date and the record date?

The ex-dividend date is the day a security begins trading without the value of the next dividend. To receive the upcoming dividend payment, the stock must be purchased before the ex-dividend date.

On the ex-dividend date, new purchasers of the stock are no longer entitled to receive the recently declared dividend. Purchasers of stock on or after the ex-dividend date own the stock but do not receive the declared dividend. If a stock is purchased on the ex-dividend date, the dividend payment goes to the seller instead of the buyer.

The record date (or holder of record date) is the day set by the corporation to determine who is entitled to receive the declared dividend payment. To receive the dividend payment, a stockholder must own the stock as of the record date and the ex-dividend date. The record date is after the ex-dividend date and before the payment date. 

Can I sell on the record date and still get a dividend?

To receive the dividend payment, a stockholder must own the stock as of the ex-dividend date. The stock can be sold on or after the ex-dividend and still receive the dividend payment.

What is the dividend record date and payment date?

The record date (or holder of record date) is the day set by the corporation to determine who is entitled to receive the declared dividend payment. To receive the dividend payment, a stockholder must own the stock as of the record date. The record date is after the ex-dividend date and before the payment date. The payment date is the day on which stockholders of record will receive the dividend payment.

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