If you own stock in a company, you're probably aware of terminologies like ex-dividend, dividend record date, book closure start data, and book closure end date. There is a significant distinction between all of these phrases, and as a stock market investor, it is critical that you comprehend them correctly. Knowing major dividend dates is essential for understanding dividend-paying stocks. A dividend is often distributed to investors in the form of cash distribution from the company's earnings. Rather than reinvesting profits back into the firm, a firm may choose to pay a dividend to its shareholders. The most essential component in getting dividends is the time of buying and holding the stock.
What Are Dividends?
A dividend is a payment made to shareholders from a company's profits. Dividends are a type of post-tax appropriation that is given to shareholders and is indicated in rupees or percentages. For example, if the stock's face value is Rs.10 and the corporation declares a 20% dividend, shareholders will receive Rs.2 per share. As a result, if you own 1000 shares in the company, you will earn Rs.2,000 in dividends.
There are four important Dividend dates that every investor should know.
1. Dividend Declaration Date
2. Record Date
3. Ex-Dividend Date
4. Payment Date
Dividend Declaration Date
This is the date when the corporation declares dividends to its stockholders. The date of dividend distribution, the size of the dividend, the number of dividends shareholders will get for each holding share, and the record date are all discussed during the conference.
Dividend Record Date
The dividend is distributed to all shareholders whose names appear in the company's shareholder records as of the record date. The record date, also known as the date of record, is the day on which investment must be registered with the corporation in order to collect a dividend.
The ex-dividend date is sometimes mistaken with the record date. Remember that the firm determines the record date, while the stock exchange determines the ex-dividend date. Due to the fact that stock trades on exchanges have a settlement period, the ex-dividend date is sooner than the record date. The company notifies the Record Date on the day of the dividend declaration. The record date is the day on which your name must appear on the company's list of shareholders.
The ex-dividend date is the day on which all newly purchased and sold shares are no longer entitled to the most recently declared dividend. This is a crucial day for any firm with a large number of stockholders, especially companies that trade on exchanges because it simplifies the process of determining who will get the dividend.
The first day a stock trades without a dividend is known as the ex-dividend date. The ex-dividend date is determined by the stock exchange where the firm's stock is traded, not by the company itself. Up to three days before the record date, the ex-dividend date occurs. A dividend is not paid to shareholders who buy stock on or after the ex-dividend date. Investors who purchase stock on or after the ex-dividend date will not be recorded in the company's books. As a result, if you buy a stock on or after the ex-dividend date, you won't get a dividend until the next time period's dividend is declared.
Dividend Payment Date
The payment date is the day on which a company's dividend payments are mailed to shareholders or credited to brokerage accounts. The dividend amount will be automatically credited to your bank account if your bank mandate is recorded with the registrar.
Let us understand with an example
|Declaration Date||The company announces the dividend on this date.|
|Ex-Dividend Date||The deadline by which you must own the stock in order to receive the dividend|
|Record Date||The deadline by which you must be listed as a shareholder on the company's books in order to earn a dividend.|
|Payment Date||The dividend is paid to stockholders on this date.|
At its meeting today, the Board of Directors of XYZ Ltd declared an Interim Dividend of Rs. 10.00 per Ordinary Share of Re. 4/- each for the financial year ending March 31, 2021; such Dividends will be paid on Wednesday, March 10, 2021, to those Members entitled thereto. The board has set Tuesday, February 23, 2021, as the Record Date for assessing the Members' eligibility for the Interim Dividend.
Dividend = Rs 10.00 per share
Record Date: 23rd February 2021
Payment Date = 10th March 2021
Ex-dividend= 21st February 2021