Dividend Dates Explained for Beginners – Understanding Key Dividend Dates: There are lots of investors in the stock market who buy shares just to receive dividends. A regular, consistent, and increasing dividend per year is what these investors are looking for. In general, these investors invest for the long term and make regular money from dividends.
However, if you’re planning to make money from dividends or simply even to receive dividends by holding a few shares, there are few key dates that you should understand. For example, when exactly will you receive the dividends? In this on Dividend Dates Explained, we’ll discuss all the key dates related to dividends that a dividend investor should know. Let’s get started.
What are Dividends?
Before digging deeper into the dividend dates, let us first brush up on the basics so that everyone is on the same page.
Dividends are basically a portion of the company’s earnings distributed among the shareholders. Here, how much dividends are to be distributed is decided by the company and the key person on the board of directors.
Dividends are not mandatory for companies. Loss-making companies obviously are not making earnings and hence they won’t be able to share dividends. Further, growing companies might also even reinvest all their earnings in their growth and do not give any dividends to their shareholders. However, stable and mature companies generally give decent dividends to their shareholders.
For example, here is the list of recent dividends shared by few of the top companies in India:
|COMPANY NAME||Div Type||Div (%)||Ex-Dividend|
Now, the timing of buying and holding the share is the most important factor for receiving dividends. You don’t want to buy these stocks if you won’t be getting any dividends, right? For example, if you buy these stocks after a certain time, the previous seller might get the dividend as he was holding the stock when the company announced dividends.
Therefore, it is very important that you know the dates during the Dividend Announcements) by the company. It’s during these announcements when the company explains how much dividends they will give to the shareholders and the dates when the stockholders will receive their dividends.
Dividend Dates Explained: Must Know Dates for Investors
There are four important Dividend dates that every investor should know. They are:
- Dividend Declaration Date
- Record Date
- Ex-Dividend Date
- Payment Date
Among all four, the Ex-Dividend day is of uttermost importance. You will understand the importance of this date as you read this article further on the dividend dates explained. For now, let’s understand all these dates first:
1. Dividend Declaration Date
This is the date on which the company declares the dividends to the shareholders. The conference includes the date of dividend distribution, the size of the dividend, how much dividends the shareholders will receive for each holding share, and the record date.
2. Record Date
On the dividend declaration day, the company announces the Record Date. The record date is the date on which your name should be present on the company’s list of shareholders i.e. record book, to get the dividend.
Shareholders who are not registered until this date on the company’s record book will not receive the dividend. According to the company, you are only eligible to get the dividends, if your name is on their book till this record date.
3. Ex-Dividend Date
The Ex-dividend date is usually two days before the record date. In order to be able to get the dividend, you will have to purchase the stock before the ex-dividend date. If you buy the stock on or after the Ex-dividend date, you won’t get the dividend, instead, the previous seller will get the dividend.
After the company sets the date of record, the ex-dividend date is also set on the stock exchange. These two days before the record date is generally used by the stock exchange to give the name of the shareholders to the company. The investors who buy the stock on or after the ex-dividend date won’t be listed in the record book of the company. Therefore, if you purchase a stock on or after the ex-dividend date, you won’t receive a dividend until the next dividend is declared for the next time period.
4. Dividend Payment Date
This is the date set by the company on which the dividends are paid to the shareholders.
Only those shareholders who bought the stock before the Ex-dividend date are entitled to get this dividend. That’s why, as we already mentioned earlier, the Ex-dividend date is the most important date among all.
Here is a quick summary of the dividend dates explained above:
|Declaration Date||On this date, the dividend is announced by the company|
|Ex-Dividend Date||The date before which you must own the stock to be entitled to the dividend.|
|Record Date||The date by which you must be on the company's record books as a shareholder to receive the dividend.|
|Payment Date||The date the dividend is paid to shareholders.|
Example of Divided Dates Explanation
Now, let me give you an example of the company’s dividend announcement so that you get a good knowledge of the above dividend dates explained. ITC Interim Dividend Announcement:
“The Board of directors of ITC Ltd at its meeting held today has declared an Interim Dividend of Rs. 5.00 per Ordinary Share of Re. 1/- each for the financial year ending on 31st March 2021; such Dividends will be paid on Wednesday, 10th March 2021 to those Members entitled thereto. The board also fixed Tuesday, 23rd February 2021 as the Record Date for the purpose of determining entitlement of the Members for such Interim Dividend.”
In the above announcement, the company announced few important points
- Dividend = ₹5.00 per share
- Record Date: 23rd February 2021
- Payment Date = 10th March 2021
The expected Ex-dividend date should be 21st February 2021 i.e. those investors who buy (or are holding) the stock of ITC before this date will be entitled to receive the dividend.
Further, if you want to know the dates of the upcoming dividends payment date, you can get it from the money control website using this link.
That’s all for this post on Dividend dates explained. I hope it was helpful to the readers. If you have any doubts or need any further help on the topic ‘dividend dates explained’ feel free to comment below. I will be happy to help you out. Have a great day and happy investing.
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting