Introduction To Dividends: Dividend Dates

A company’s Board of Directors must declare all dividends. Four dividend-related dates are important to this process:

Declaration Date

The declaration date is the date the dividend is announced by the Board of Directors. The declaration statement includes the size of the dividend, the date of record and the payment date (see below). Once a dividend is declared, the company has a legal responsibility to pay it.

Record Date (or Date of Record)

When a company announces a dividend, it sets a record date – the date you must be on the company’s books to receive the declared dividend. On the record date, the company determines its shareholders, or “holders of record,” and establishes who is sent financial reports, proxy statements and other information.

Ex-Dividend Date (or Ex-Date)

After the company sets the record date, the ex-dividend date is set in accordance with stock exchange rules. If you buy the stock before the ex-dividend date, you’ll receive the dividend – but if you buy on or after the ex-date, you won’t (in this case, the seller of the stock is entitled to the dividend). As an example, assume that stock ABC recently announced a cash dividend with an ex-dividend date of December 7. If you buy 100 shares of ABC on that date (or after), you won’t receive the dividend, but if you buy the shares on December 5 – before the ex-dividend date – you’ll be entitled to the next dividend. (For more, read Why Don’t Investors Buy Stock Just Before the Dividend Date and Sell Right Afterwards?)

The ex-dividend date is usually set one business day before the record date. A stock’s price may increase by the dollar amount of the dividend as the ex-date approaches. On the ex-dividend date, the exchange may reduce the price per share by the dollar amount of the dividend. [L3]

Payment Date (Payable Date)

The payment date is the scheduled date the company pays the declared dividend. Only shareholders who own the stock before the ex-dividend date are entitled to the dividend.

Here’s an example that shows the timeline for a dividend Coca-Cola paid in Oct. 2017:

Figure 2: Important dividend dates.