Ex-Dividend Date, Record Date & Pay Date Explained

Up to date on Might eleventh
By Bob Ciura, David Morris, & Ben Reynolds

The dividend fee course of could appear easy.  You spend money on a dividend paying inventory, after which the dividends find yourself in your brokerage account when funds are made (sometimes quarterly).

There’s truly 4 steps to this course of that usually go unnoticed by dividend buyers:

1. Declaration date
2. Ex-Dividend date
3. File date
4. Fee date

Buyers ought to develop into acquainted with all 4 phrases earlier than shopping for a dividend inventory, as with the ability to determine these dates will assist keep away from any potential confusion.

This text will focus on every time period intimately, and use two examples to indicate how these dates might be simply discovered for particular corporations.

Desk of Contents

Overview Of The 4 Step Dividend Fee Course of

Step #1:  First, an organization declares they’re paying a dividend.  That is the dividend declaration date.

Step #2:  Then, an organization decides which shareholders will obtain a dividend.  Shareholders who personal shares earlier than the ex-dividend date will obtain the following dividend fee.
Essential Word:  The ex-dividend date is 2 days earlier than the file date.

Step #3:  The file date is the date when the company truly seems to be at its data to find out who will obtain the dividend.

Step #4:  Lastly, the fee date is the fee date, when the dividend is definitely paid to shareholders.

What actually issues for shareholders is receiving the dividend in query.  And three vital dates decide who receives the dividend (and who doesn’t).

The primary vital date is your buy (transaction) date. When shares commerce arms, they really achieve this on the precise buy date, although the formal settlement date is usually delayed by a couple of days time. For dividend functions, the acquisition date could make a distinction. You could buy  at some point prematurely of the ex-dividend date to obtain the dividend fee in query.

As mentioned above, the ex-dividend date determines whether or not it’s the purchaser or the vendor who receives the dividend. Buyers who buy shares on or after the ex-dividend date won’t be paid that quarter’s dividend. Buyers who buy shares earlier than the ex-dividend date will be paid that quarter’s dividend.

And eventually, the fee date is the date the dividend fee is definitely despatched.  Relying on the medium by way of which you personal your shares, dividends could also be mailed to you as a test, wired into your checking account, or deposited into your brokerage account as money.

Dividend Declaration Date

The declaration date is the date on which the corporate’s Board of Administrators declares the following dividend fee to shareholders. It’s merely an announcement – no dividends are paid on the declaration date.

Typically, dividends are paid quarterly, so declaration dates are quarterly as properly.

Whereas dividends are by no means assured, it’s typically a purpose of firm administration to develop their dividend funds over time. It is a shareholder-friendly exercise that’s seen as an indication of underlying enterprise energy, and is definitely mentioned in nice element at Board of Administrators conferences.

Corporations will typically make it very clear when their dividends are introduced through a press launch on their Investor Relations web site.

File Date Versus Ex-Dividend Date

The file date and the ex-dividend date decide which shareholders are eligible to obtain firm dividends.

If shares commerce arms within the time main as much as a dividend fee, these two dates decide whether or not it’s the purchaser or the vendor who receives the dividend.

The file date is the date on which firm administration seems to be at their shareholder data to see who’s eligible to obtain the corporate’s future dividend fee. Nevertheless, this date is of little significance to buyers. Shopping for the corporate’s inventory on the file date doesn’t imply that you’ll obtain the corporate’s subsequent dividend.

Virtually talking, an important date for dividend buyers to pay attention to is the ex-dividend date. This date, which is two days earlier than the file date, has a lot better implications for portfolio administration.

Buyers who buy shares on or after the ex-dividend date won’t be paid that quarter’s dividend (though they are going to be entitled to future dividends, assuming they nonetheless maintain the shares). Buyers who buy shares earlier than the ex-dividend date will be paid that quarter’s dividend.

The explanation why the ex-dividend date is 2 days sooner than the file date is as a result of it takes three days for a commerce to ‘settle’ – for money and shares to legally commerce arms.

This appears counterintuitive. Anybody who has positioned trades earlier than is aware of that money is deposited to your account on the day that you simply promote shares. Usually, that is just because your dealer is prepared to entrance you the cash prematurely whereas they wait to obtain cash from the counter-party. The precise course of takes three days to finish.

For this reason you should buy three days prematurely of the file date (or at some point prematurely of the ex-dividend date) to obtain the dividend fee in query.

The Fee Date

The fee date is the date on which company money is definitely paid to shareholder as a dividend. Relying on the medium by way of which you personal your shares, dividends could also be mailed to you as a test, wired into your checking account, or deposited into your brokerage account as money.

Many corporations additionally provide a Dividend ReInvestment Plan (or a DRIP, for brief). These plans permit buyers to make use of dividends to buy extra firm shares.

You may view the 15 greatest DRIP shares right here (every of the shares in that article cost no charges for his or her DRIPs).

Two Actual-Life Examples of the Dividend Fee Course of

Suppose an investor is trying to provoke a place in high-quality dividend progress inventory AbbVie Inc. (ABBV), which is certainly one of our top-ranked dividend shares and a member of the Dividend Aristocrats.

You may obtain a full record of all 65 Dividend Aristocrats by clicking on the hyperlink under:

An investor buying the inventory at the moment would possible wish to be sure that she or he is eligible for the corporate’s subsequent quarterly dividend fee. As such, buyers have to buy earlier than the corporate’s ex-dividend date.

The simplest technique to discover this date is by trying immediately on the corporate’s Investor Relations web page, which might be simply discovered through a Google search.

AbbVie’s Investor Relations website reveals that the corporate’s subsequent ex-dividend date is in mid-July.

Or, buyers can see AbbVie’s dividend historical past within the Inventory Data portion of its Investor Relations web page. There, buyers will discover that AbbVie has declared two dividend payouts of $1.41 per share thus far this 12 months, after paying out $5.20 per share in 2021.

Supply: AbbVie Investor Relations

Making use of the identical methodology yields similar outcomes for industrial big 3M Firm (MMM), which has a fair longer dividend historical past than AbbVie.

3M has paid dividends for over a century, and has elevated its dividend every year for the previous 60 years in a row. 3M is a Dividend Aristocrat, and a Dividend King as properly.

You may obtain a free record of all 44 Dividend Kings by clicking on the hyperlink under:

First, seek for 3M’s dividend data on Google. Whereas the corporate’s Investor Relations web page may not be the primary outcome, it’s nonetheless on the primary web page of the search engine and thus very straightforward to seek out.

As soon as there, scrolling down results in a desk that’s much like AbbVie’s Investor Relations web page.

In distinction to AbbVie, 3M has declared just one dividend thus far in 2022, with three extra to return. Its most up-to-date dividend fee was made on March twelfth. It’s possible that 3M will announce its second quarterly dividend payout of the 12 months over the approaching days.

These two examples present exactly how straightforward it’s to seek out data on file dates, ex-dividend dates, and pay dates for company dividends.

Closing Ideas

As buyers, there are a lot of different extra vital points that we ought to be involved with, as an alternative of merely the timing {that a} particular firm makes use of to pay its dividends.

On an organization’s ex-dividend date, shares typically drop by an quantity roughly equal to the corporate’s subsequent dividend fee.

Buyers eager to ‘lock in’ the acquire of that dividend, however who don’t buy earlier than the ex-dividend date can nonetheless buy shares on the ex-dividend date at a reduction roughly equal to the dividend quantity.

Due to this, there is no such thing as a benefit to ready to buy shares.

As an alternative, concentrate on creating a long-term systematic investing plan that will probably be profitable no matter your timing of dividend funds.

Moreover, be sure that an organization’s dividend is sustainable for the long term. This requires an organization to have sturdy aggressive benefits, a steadily worthwhile enterprise mannequin even throughout recessions, and a optimistic progress outlook.

If you happen to discover a firm that ranks favorably in keeping with a confirmed system such because the Positive Evaluation Analysis Database, purchase some shares and concentrate on holding the inventory over the long-term.

Different Dividend Lists

The Dividend Aristocrats and Dividend Kings lists should not the one technique to rapidly display screen for shares that frequently pay rising dividends.

There’s nothing magical concerning the Dividend Aristocrats. They’re ‘simply’ a set of high-quality shareholder pleasant shares which have sturdy aggressive benefits.

Buying all these shares at honest or higher costs and holding for the long-run will possible lead to favorable long-term efficiency.