Dividend stocks are attractive for many investors searching for income. In the context of dividend investing, there are three key dates you need to know:
- Record date: This is the date on which you must be an official owner of a stock to receive the declared dividend payment. However, due to stock exchange rules, you must own a stock two business days before the record date to get the dividend.
- Ex-dividend date: The stock’s ex-dividend date, or “ex-date,” is the first trading day where an upcoming dividend payment is not included in a stock’s price. Thus, to receive a dividend, you must have owned the stock before the ex-dividend date.
- Payment date: This is the date on which a dividend payment is actually made to shareholders. The payment date is when the dividend payment should show up in your brokerage account. Most pay dates occur within two to four weeks after the record date. However, the pay date can occur just a few days after the record date
In addition, there is also the declaration date. This is the day a company officially announces its board of directors has decided to make a dividend payment in the future often this is proposed in a shareholder meeting and approved in the following one. Of all the dates, it’s the least important.
In general, there are two types of dividend, the regular dividend, and a special dividend. The special dividend is often a “one-off payment” to reward shareholders. A company could, for example, announce a special dividend after selling part of its business or “Tax break”.
An example: Apple Inc. (AAPL) had the following dividend dates in August 2019:
Ex-dividend: August 9th
Record date: August 12th
Payment date: August 15th
In the example above, you can see that Apple dividend frequency is quarterly. The most common distribution frequencies are monthly and quarterly- which is favored by US companies. However, the pay dates also can occur annually and semiannually – this is often the case for European companies.