When I first starting investing in stocks at the ripe old age of 14 with the help of my mom, I was always confused by what the terms declaration date, ex-date, and pay date meant when it came to dividends. In fact, I was confused on this topic for a few years until it finally sank in. I’m hoping that I can save many of you the same headaches that I went through when trying to remember what each one of these mean.
This is the date that the company announces it will pay a dividend for the quarter and how much it will be. In many cases, this date will be announced during an earnings call with analysts. An example would be if ABC Company was holding a conference call, they would say that they are declaring a dividend of $0.25 per share to be paid on a certain day in the future.
At a point after the dividend is declared, but before it is paid is the ex-dividend date. This is the most important date if you are interested in receiving the dividend. The ex-dividend date is the day when shares that are bought and sold are no longer attached to the dividend. In other words, if you want to receive the dividend, you must own the stock of the company before this date. For example, let us say that I am interested in receiving the $0.25 dividend from ABC Company that they declared. If the ex-dividend date is June 15th, then I need to own shares of ABC Company before this date. If I own 100 shares as of June 15th, I’ll receive a $25 dividend. If I buy an additional 100 shares on June 17th, I would still receive a $25 dividend because I bought the additional shares after the ex-date. Understand this isn’t because the company has paid the dividend yet, it is because I bought after the ex-date.
Dividend Pay Date
This is the second most important date when it comes to dividends. This is the date you actually receive the dividend, hence the name pay date. If you log on to you brokerage account the day of, you will not see the cash in your account. It will not show up until the end of the business day. Same goes for re-invested dividends. You won’t see any transactions until after the close of business.
In most cases, companies pay out dividends four times per year, spread out per quarter. In some cases, a company will be rich with cash and decide to pay a special one-time dividend. In either case, it is important to stay on top of the news if you are a dividend investor. There are many websites out there that will list all of the above dividend dates for you so that you won’t miss the opportunity to earn a dividend.