Understanding Dividend Dates: A Comprehensive Guide

In order to understand dividend-paying stocks, knowledge of important dividend dates is crucial. A dividend typically comes in the form of a cash distribution that is paid from the company’s earningsStatement of Retained EarningsThe statement of retained earnings provides an overview of the changes in a company's retained earnings during a specific accounting cycle. It is structured as an equation, such that it opens with the retained earnings at the beginning of the reporting period, makes adjustments for items such as net income and dividends to investors. Instead of reinvesting cash back into the business, a company may choose to transfer value to shareholders by means of a dividend.

Key Dividend Dates

There are four key dates to keep in mind when holding a dividend-paying stock:

1. Declaration Date

The declaration date is the date on which the board of directors announces and approves the payment of a dividend. The declaration includes the size of the dividend being issued and outlines the record date and payment date.

For example: On October 18, 2018 (declaration date), Coca-Cola Co. declared a dividend of $0.3900 per share (size of dividend) payable on December 14, 2018 (payment date) to shareholders of record as of November 30, 2018 (record date).

2. Ex-Dividend Date

The ex-dividend dateEx-Dividend DateThe ex-dividend date is an investment term that determines which stockholders are eligible to receive declared dividends. When a company announces a dividend, the board of directors set a record date when only shareholders recorded on the company’s books as of that date are entitled to receive the dividends. is the first day that a stock trades without a dividend. The company does not set the ex-dividend date – the ex-dividend date is set by the stock exchange where the company’s stock is traded. The ex-dividend date typically occurs up to three days before the record date. Purchasers of shares on or after the ex-dividend date are not entitled to a dividend.

For example, the ex-dividend date for Coca-Cola is November 29, 2018, which is one day before the record date.

3. Record Date

The record date, also known as the date of record, is the date on which the investor must be on the company’s books in order to receive a dividend.

The record date is commonly confused with the ex-dividend date. Recall that the record date is set by the company and the ex-dividend date is set by the stock exchangeStock ExchangeA stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold. Stock exchanges allow companies to raise capital and investors to make informed decisions using real-time price information. Exchanges can be a physical location or an electronic trading platform.. The ex-dividend date is earlier than the record date due to the fact that there is a settlement period for stock trades on exchanges.

Consider the following: when an investor purchases a stock on an exchange, it takes time for the investor’s information to be updated on the company’s books. Most North American financial products are on a t+2 settlement period. In other words, it takes two business days for a stock trade to settle.

For example, the ex-dividend date for Coca Cola is November 29, 2018, while the record date is November 30, 2018. In addition, the settlement period is t+2.

• A stock purchaser of Coca Cola stock on November 29, the ex-dividend date, would not be entitled to a dividend because the trade would settle on December 1 (past the record date).
• A stock purchaser of Coca Cola stock on November 28, the day before the ex-dividend date, would be entitled to a dividend because the trade would settle on November 30, so the investor would be on the company’s books on the record date.

4. Payment Date

The payment date is the date on which the dividend is paid to shareholders. Dividend payments may be either mailed or electronically transferred to the accounts of shareholders.

For example, the dividend payable date for Coca Cola is December 14, 2018. On December 14, shareholders of Coca Cola before the ex-dividend date would receive a dividend of $0.3900 per share.

Additional Resources

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™Become a Certified Financial Modeling & Valuation Analyst (FMVA)®CFI's Financial Modeling and Valuation Analyst (FMVA)® certification will help you gain the confidence you need in your finance career. Enroll today! certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

• Accelerated DividendAccelerated DividendAn accelerated dividend is a dividend that is paid out ahead of a change in the way the dividends are treated, such as a change in the tax rate of dividends. The dividend payments are made early in order to protect shareholders and mitigate the negative impact that a change in dividend policy brings about.
• Capital Gains YieldCapital Gains YieldCapital gains yield (CGY) is the price appreciation on an investment or a security expressed as a percentage. Because the calculation of Capital Gain Yield involves the market price of a security over time, it can be used to analyze the fluctuation in the market price of a security. See calculation and example
• Dividend Discount ModelDividend Discount ModelThe Dividend Discount Model (DDM) is a quantitative method of valuing a company’s stock price based on the assumption that the current fair price of a stock
• Special DividendSpecial DividendA special dividend, also referred to as an extra dividend, is a non-recurring, "one-time" dividend distributed by a company to its shareholders. It is separate from the regular cycle of dividends and is usually abnormally larger than a company’s typical dividend payment.