Dividend dates explained: declaration, ex-dividend, record and payment
A dividend is a payment a company makes to its shareholders, usually in cash, out of its profits. Whether you receive it depends on when you buy or sell the stock. Four dates matter.
The four dates
- Declaration date. The company’s board announces the dividend, its amount and the other key dates.
- Ex-dividend date. The cut-off. If you buy the stock on or after this date, you will not receive the upcoming dividend; the seller will.
- Record date. The date on which the company checks its records to see who its shareholders are.
- Payment date. The day the dividend is actually paid.
Why the ex-dividend date and record date now usually match
Since May 28, 2024, most US securities trades settle one business day after the trade date (known as T+1). Under current exchange rules, the ex-dividend date for stocks is usually set on the record date itself, or one business day earlier if the record date is not a business day. To receive the dividend, you need to buy the stock before the ex-dividend date.
Special rules apply when a dividend is 25% or more of the stock’s value: the ex-dividend date is then deferred until one business day after the dividend is paid. Stock dividends follow their own procedures. Investor.gov explains the details with examples.
What happens to the price
On the ex-dividend date, a stock’s price often drops by roughly the amount of the dividend, because new buyers are no longer entitled to that payment. Other news on the same day can make the move larger or smaller.
Dividend yield
Dividend yield is the annual dividend per share divided by the share price. A company paying $2 a year on a $50 stock has a 4% yield. Yield rises when the price falls, so an unusually high yield can be a sign that investors expect the dividend to be cut.
Dividends are not guaranteed
Companies can raise, reduce, suspend or eliminate dividends at any time. A long payment history does not promise future payments. Dividends may also be taxable, and the tax treatment depends on the type of dividend and the account that holds the shares.
Key points
- Buy before the ex-dividend date to receive the next dividend.
- The ex-dividend date is usually the record date (or the business day before it).
- Yield = annual dividend ÷ price. Dividends can be cut.
This article is general information, not investment advice. It does not consider your personal situation. Consider speaking with a licensed financial professional before making investment decisions.
