As you learned in the previous lesson of the dividend investing course, a dividend is a payment that shareholders receive for their investment in a company. It is paid through a check or, most commonly, you’ll receive it directly in the bank or brokerage account where you hold your stocks.
Companies usually distribute their dividends in the form of cash, but they can opt for a stock dividend too. In this case, a company distributes profits in the form of additional shares instead of delivering cash. There are many reasons why a company could decide to distribute additional shares instead of cash, and we will analyze them deeper in the stock dividend lesson.
Dividends are paid on a per-share basis, so the dividend amount you get depends on the number of shares you own. For example, Apple currently distributes a $0.82 quarterly dividend per-share. Thus, if you own 10 shares, you’ll get $8.2 each quarter.
To find information about a company’s dividend, you can use the Finbox dividend analysis tool to access data for 100.000+ companies around the world.
When Are Dividends Paid?
Dividends are paid in the payment date decided by the company when he declared the dividend (declaration date). However, to be entitled to the payment, you must buy the stock before the ex-dividend date.
The declaration date, also known as the announcement date, is the day that the company’s board of directors declares the next dividend. Besides the next dividend payment date, the company informs its shareholders of the dividend’s amount and the ex-dividend date.
The ex-dividend date is probably the most important of the four dates because it defines which shareholder will be qualified to get its next dividend. Indeed, only the shareholders who bought the stock prior to the ex-dividend date will receive the dividend.
This is why stock prices tend to drop by the amount of the dividend on the ex-dividend date. Since you receive the dividend if you buy the stock the day before the ex-date, no investor would ever pay the same price the following day if he’s not entitled to receive the dividend anymore.
The ex-dividend date is usually one or two business days before the record date.
The record date is when the company settles the shareholders of record list. In most countries, this is an automatic process, and the investors who bought the stock before the ex-dividend date will be recorded in the list and be entitled to receive the dividend.
The payment date is usually up to a month after the record date, and it is the date in which the eligible shareholders will actually receive the declared dividend.
You can find all the information about a company’s dividend dates with the Finbox dividend analysis tool, as shown below.