Article

Dividend Dates that Matter
January 07 , 2013

When a firm pays dividend the news causes much flutter in the market. Its current shareholders would be delighted but wannabes would usually be willing to buy it only a lower price than what it was trading before the news broke out. Here are 4 important dates related to dividends that share investors must be aware of.

1. Dividend declaration date

On declaration date the firm's directors announce the good news about dividend payment. They disclose details like record date, payment date on this date.  

2. Record date

The company checks its registers on record date to see who figures on the list of current shareholders. These are the ones who will bag the dividends. The shares must be in investor's demat account on record date.

3. Ex-dividend date

Shares sold on or after ex dividend date are not entitled to dividends declared. This date is declared on the exchange and share value usually falls on this date since the firm is paying out part of its earned money. Ex dividend date in India is usually one day prior to record date since we follow T+2 settlement which means shares bought up to a day prior to ex dividend date will be in the demat account by the record date and be eligible for receiving dividend.

4. Payment date

This is the day of action. Dividends are paid out to shareholders on payment date.

Illustration
Bit confusing? Let's understand with an example. Suppose you are a shareholder of TCS. The board of directors of TCS declare dividend on 15 January and announce 21 January as record date and 29 January as payment date. Here 20 January would be the ex dividend date. If you held shares of TCS on 21st you get the dividends on 29th. If you buy shares on the 20th you would not get any dividends since the shares would not be credited to your demat account by the 21st. Instead the fellow you bought shares from on the 20th would get those dividends.

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