Table Of Contents
How Are Dividends Paid?
In the previous lesson of this dividend investing course, I outlined that a dividend is a payment that shareholders receive for their investment in a company. A cash dividend is paid via a check or, more commonly, received directly in the bank or brokerage account where you purchased the stock.
Companies usually distribute dividends in the form of cash, but sometimes opt to do a stock dividend. 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 $8.20 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?
Most companies pay dividends every quarter (in line with earnings reports) while some pay it annually, semi-annually (twice a year), or monthly.
The dividend payment date is announced by the company when it declares the dividend (declaration date). However, to be entitled to the payment, an investor must own 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. In addition to 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 the most important of the four dates because it determines which shareholders will be qualified to get the dividend. Only shareholders who own the stock as of the ex-dividend date receive the dividend.
The stock price is adjusted by the amount of the dividend on the ex-dividend date. Since only investors who own the stock before the ex-dividend date receive the dividend, investors purchasing shares after the ex-dividend date pay the dividend-adjusted price.
For example, let assume Apple pays a $0.82/share quarterly dividend. If Apple's stock price is $300.12/share at the close of trading on the ex-dividend date, the adjusted close price would be $299.30/share.
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.
As the name suggests, eligible shareholders receive the declared dividend on the payment date. The payment date can be as much as a month after the record date.
You can find all the information about a company's upcoming dividend dates with the Finbox dividend analysis tool, as shown below.