Ex-Dividend Date is the single most important date to look out for if you want to receive your first dividend payout. However, first time stock investors or newbies may think that they could get the stock dividend as long as they own it before its record date or its payment date. This will be a big mistake for them to miss the Ex-Dividend date and the worse is not over. For some cases especially in a volatile stock market, you might end up owning a stock with a dropping price after the dividend payment date.
Date Sequences for Dividend Payment
Before explaining the types of dates relate to dividend payment, it may be better to know the correct sequence of dates so that you will not miss to receive the dividend. This is assumed that you want to get the dividend of a new stock that you intend to acquire. For existing and valid stock holders, it does not matter the date sequence.
Declaration Date > Ex-Dividend Date > Record Date > Payment Date
What is Declaration Date?
The declaration date is the day that the company declares that it will pay a dividend. Information of how much it will pay, the ex-dividend date, and the payment date will be provided on this date.
Another term for declaration date is called the “announcement date”. I prefer to check the dividend payout history before entering into a dividend play for a particular stock. If it shows consistency, predictability or even a rising trend in dividend payout amount, it may be considered as a good dividend stock to invest.
What is Ex-Dividend Date?
In a simple layman explanation, just remember to buy and own the stock before the ex-dividend date. e.g. if the ex-dividend date is on 28 January 2018, you can buy the stock any date prior to 28 January 2018 so as to entitle the dividend payment on the payment date. Failure to do so will allow the seller of the stock to enjoy this dividend.
Another term for Ex-Dividend Date is Ex-Date and it is normally two business days before the record date.Once the company sets the record date, this means that you are a shareholder of the company’s stock will entitle to receive the dividend and your shareholder’s records is on the company’s book.
Myth of Ex-Dividend Date
Some investors thought that they need to hold the stock until its record date or payment date so as to get the dividend. But this is not true. If you own the stock before the ex-dividend date, you can sell that stock on the ex-dividend date and to also receive your dividend payment on the payment date.
What is a Record Date?
The record date is determined by the board of directors of a corporation. It refers to the date by which investors must be on the company’s books in order to receive dividends. Additionally, it is also the date the board of directors must take note to determine who are their rightful shareholders for the delivery of the annual reports. Another term for Record Date is Date of Record.
What Is Payment Date?
This is the date when you will be glad to receive your dividends after a wait.
Dividend play is definitely one of the key strategies used by value investors. If you wish to buy a stock to get its dividend, do your due dilgence check first. If the stock is worthwhile to buy, you may acquire the stock one day or anytime prior the Ex-Dividend Date.