Don’t be confused by dividend dates, at the end of the day only the ex-dividend date really matters for dividend investors. The reason for this is the ex-dividend date is the date that determines if you will or will not receive the dividend, whether or not you still own the stock.
What are the Four Dividend Dates?
1. Declaration Date:
Board of directors announces that a dividend will be paid as of a certain date in the future (the Record Date)
2. Ex-Dividend Date
Typically 2 days prior to the Record Date, the Ex-Dividend Date is the cut-off for shareholders to receive a dividend. If you own a stock BEFORE the Ex-Dividend Date you get the dividend. If you own a stock on or after the Ex-Dividend Date you will not receive a dividend.
3. Record Date
The Record Date is set by the board of directors as the cut-off date that shareholders will get a dividend. But since exchanges need a couple days to sort out the paperwork, the Ex-Dividend Date is the more important of the two for deciding who gets the dividend.
4. Payment Date
The payment date is the actual date that the dividend payment is made to all shareholders of record, if you owned the stock BEFORE the Ex-Dividend Date you are entitled to the payment, even if you sold the stock AFTER the Ex-Dividend Date.
An Example of Dividend Dates:
At its latest meeting on January 1st, IBM’s Board of Directors declares they will pay a dividend to investors which will be paid to all shareholders of record as of the record date on March 15th. The Ex-Dividend Date is set by the exchange two days ahead of the record date on March 13th, to ensure the exchange can get all its paperwork done. Investors holding IBM shares before March 15th will get the dividend, investors holding IBM shares on or after March 15th will not receive the dividend. Finally, the Payment Date will determine the date that the company actually pays out the dividend to all the shareholders who held IBM stock before the Ex-Dividend Date.