In completing your understanding of dividends there is some important timeline information that you need to comprehend regarding dividend entitlements. There are some important dates that you need to be aware of once a company’s Executive Board has announced that a dividend entitlement will be available to shareholders. These dates serve the purpose of establishing which shareholders are entitled to receive shares and which do not.
The dividend declaration date or dividend announcement date is the date on which the Executive Board releases to the public what dividend entitlement each shareholder is entitled to receive.
Typically on this date if the dividend announcement is lucrative, there will be increased trading activity on the company making the declaration as investors want to receive the dividend entitlement.
The Ex-dividend date is the date whereby any securities purchased from a company will not be entitled to receive a dividend. It is the cut off point for you to purchase stock in the company and still receive a dividend payment – stock purchased after this date are deemed to be ex-sale or ex-purchase securities and don’t get dividend rights. The ex-dividend date is set because companies need to finalize their expenses and establish which shareholders are entitled to receive dividends. Shares traded before the Ex-Dividend Date are termed cum-trading shares because they have with a dividend attachment from the company. These are termed shareholders cum-dividend right attachments.
The Date of Record and Payment Date represent the end of dividend entitlement process. Date of Record is the date whereby the company looks at its share subregister and establishes whether you have cum-dividend rights attachments to ensure that you receive your appropriate dividend payout according to the amount of shares you hold. The Payment Date is the date that the company will mail out the dividend payment to you – usually in cheque form but can also be electronically transferred if requested – and the dividend process is completed.
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Dividend Dates
- Ensure you know the schedule of dates for the company you are purchasing shares, so you can receive a dividend right attachment if applicable.
- The most important two dates are the Ex-Dividend Date and the Record Date because you must purchase your shares before the ex-dividend date and ensure these shares are settled by the record date. This ensures that you will receive payment as a cum-share rights holder. In our example, these two dates are the 18th and the 23rd respectively.
- If you wish to purchase the shares just to receive the dividends and then sell them again – you must buy the shares before the ex-dividend date and sell them after the record date to be entitled to the dividends. In our example, this means buying the shares on or before Thursday 17th and selling them after Thursday 24th.
