Ex dividend dates
The companies that earn profit perform three things. The first thing is, they pay the profit to their shareholders ; second, they re-invest the same in their business through expansion of the venture, and lastly debt reduction or share re-purchase or both the options. So, whenever a portion of these profits is paid to the shareholders, the payment made is known as the dividend.
In the present scenario, perception towards dividend concept has been diversified. The investors insight has become more experienced. He looks into capital gains and dividends as a source of increment and progress for his own benefit. Dividends should be declared by the Board of Directors of a company each time they are paid. During such process the ex-dividend comes into picture. Three important dates are processed with right to dividends.
The first date is the declaration date, which is the day when the Board of Directors announce their purpose to payment of a dividend and on this date they even announce a date of record and a date of payment. On this due date, a liability is created by the company on their record. The company owes the amount to the stockholders. The Date of record is also referred to as ex-dividend date. On this day, the stockholders of the record are provided with the upcoming payment of dividend. It is even put into notice that a stock usually begins trading ex-rights or ex-dividend on the fourth business day which is before the date of payment. The owners of the shares get this dividend only on or before the payment date. If a shareholder has purchased any share of any particular brand after the ex-dividend date, he would not receive the upcoming dividend payment. However, the investor from whom he had purchased such shares will receive the dividend payment.
Lastly, in the dividend process, the payment date refers to the dividend date that would be actually provided to the companys shareholders. A majority of dividends are paid four times in a year on a quarterly basis. It depends on the companies or brands in providing different dividend amounts.
Several websites provide information on these dividend dates to the people who are unknown to such important dates in the shareholding process. A person should decide upon whether he should receive cash or mostly stock dividends by observing two important dates. These dates are the record date or the date of record and another is the ex-dividend date which is called the ex-date. Whenever a dividend is declared by a company, the company sets a record date as to when the person must be on the companys books as a shareholder to receive such dividend. These companies even use this date i.e. the record date to determine as to who has sent the financial reports, proxy statements and other specific information.
Once this date is fixed, the stock exchange fixes the ex-dividend date. This date is usually set for stocks that are two days prior to the record date. However, if the person purchases the stock on its ex-dividend date or after such date, he will not receive the next dividend payment, but his seller from whom he has purchased the stock receives the dividend amount. If the person purchases the stock before the ex-dividend date, he would certainly receive the dividend amount.
The person has to remember that by selling his stock before the ex-dividend date, he would be selling away his right to the stock dividend. Sometimes, a company pays a dividend in the form of stock rather than cash. This stock dividend may be the companys additional shares. The process of stock dividends is however different from the cash dividends. The ex-dividend date during the stock dividend is set on the first business day after such stock dividends are paid.
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