As the year 2020 draws near, most companies will be paying dividends in the first to the second quarter of the year. To maximize the benefit of dividends as a recipient, you need to understand all there is to the payment of dividends.
To start with, what are dividends? Dividends are one way in which companies “share the wealth” generated from the business. They are usually paid in cash, often drawn from earnings paid to investors of a company – shareholders. These are paid on an annual or commonly, quarterly basis.
Investors should become familiar with all four steps before buying a dividend stock, as being able to identify these dates will help avoid any potential confusion.
There are four steps to this process that often go unnoticed by dividend investors:
- Declaration date
- Ex-Dividend date
- Record date
- Payment date
Investors should become familiar with all four steps before buying a dividend stock, as being able to identify these dates will help avoid any potential confusion.
Step 1
First, the company declares its dividend payment. This is the dividend declaration date.
Step 2
Second, a company decides which shareholders will receive a dividend. Shareholders who own shares before the ex-dividend date will receive the next dividend payment.
Important Note: The ex-dividend date is two days before the record date.
Step 3
Third, the record date is the date when the corporation looks at its records to determine who will receive the dividend.
Step 4
Finally, the ex-dividend date is the payment date, when the dividend is paid to shareholders.
What matters for shareholders is receiving the dividend in question. And these important dates determine who receive the dividend and who does not.
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