Have you’ve ever been confused by the assortment of dividend dates, you wouldn’t be an orphan. This review will navigate you through the dividend terminology. The key dates are called the ex-dividend date; the record date or books closing date; and payable date or payment date. Fortunately for us, the only two dates that matter for investors are: the ex-dividend date and the payable date.
When a share announces a dividend, as well as the dividend per share, it also declares a books closing date (which, as we’ve noted, can also be called the record date). Dividends are paid to all investors listed on the company’s share register at the record date. The investor must have purchased the shares at least five trading days before the books close.
Share holders do not have to determine the ex-dividend date from the books close date, the ASX does this for us, and ex-dividend dates are readily available in the financial press. After a company declares the books closing date, the ASX informs the market of the date investors need to have purchased by in order to be on the register at the books closing date. That ASX determined date is known as the ex-dividend date.
If you buy a stock before the ex-dividend date, the stock is cum-dividend, and you’re entitled to the dividend. If you buy it on or after the ex-dividend date, then you will not receive the current dividend and the stock is considered ex-dividend. And that’s why it’s critical for traders to understand this particular date.
In theory, the share should fall in price on the ex-dividend date by the amount of the dividend. Its important not to worry if the share gaps down by a few percent overnight. You will receive your dividend payment usually between two and eight weeks later. It is worth checking the payable date as some companies are serial offenders when it come to late payment of dividends. All things are usually not equal so a share will typically fall a little more or a little less than the dividend, depending on all the other factors that affect it on a day to day basis. The company posts out the dividend cheques on the payable date Alternatively, if you have requested a direct credit, the day the funds will be transferred to you. Investors who participate in a dividend reinvestment plan (DRP) will receive shares in lieu of cash around this date.