The Dividend Payment Procedure Explained

Up to date on Could twentieth, 2025By Bob Ciura, David Morris, & Ben Reynolds

The dividend fee course of could seem easy. You put money into a dividend paying inventory, after which the dividends find yourself in your brokerage account when funds are made (usually quarterly).

Revenue buyers on the lookout for high quality dividend shares ought to begin with the Dividend Kings, a bunch of 55 shares which have raised their dividends for at the very least 50 consecutive years.

You possibly can obtain a free checklist of all 55 Dividend Kings by clicking on the hyperlink under:

There’s truly 4 steps to the dividend fee course of that usually go unnoticed by dividend buyers:

Declaration date
Ex-Dividend date
File date
Cost date

Traders ought to grow to be aware of all 4 phrases earlier than shopping for a dividend inventory, as with the ability to establish these dates will assist keep away from any potential confusion.

This text will talk about every time period intimately, and use two examples to indicate how these dates may be simply discovered for particular firms.

Desk of Contents

Overview Of The 4 Step Dividend Cost Course of

Step #1: First, an organization declares they’re paying a dividend. That is the dividend declaration date.

Step #2: Then, an organization decides which shareholders will obtain a dividend. Shareholders who personal shares earlier than the ex-dividend date will obtain the subsequent dividend fee.Essential Observe: The ex-dividend date is 2 days earlier than the report date.

Step #3: The report date is the date when the company truly appears to be like at its data to find out who will obtain the dividend.

Step #4: Lastly, the fee date is the fee date, when the dividend is definitely paid to shareholders.

What actually issues for shareholders is receiving the dividend in query. And three vital dates decide who receives the dividend (and who doesn’t).

The primary vital date is your buy (transaction) date. When shares commerce fingers, they really achieve this on the precise buy date, despite the fact that the formal settlement date is often delayed by just a few days time.

For dividend functions, the acquisition date could make a distinction. You will need to buy at some point upfront of the ex-dividend date to obtain the dividend fee in query.

As mentioned above, the ex-dividend date determines whether or not it’s the purchaser or the vendor who receives the dividend. Traders who buy shares on or after the ex-dividend date won’t be paid that quarter’s dividend.

Traders who buy shares earlier than the ex-dividend date will probably be paid that quarter’s dividend.

And eventually, the fee date is the date the dividend fee is definitely despatched. Relying on the medium via which you personal your shares, dividends could also be mailed to you as a test, wired into your checking account, or deposited into your brokerage account as money.

Dividend Declaration Date

The declaration date is the date on which the corporate’s Board of Administrators broadcasts the subsequent dividend fee to shareholders. It’s merely an announcement – no dividends are paid on the declaration date.

Usually, dividends are paid quarterly, so declaration dates are quarterly as properly.

Whereas dividends are by no means assured, it’s typically a purpose of firm administration to develop their dividend funds over time.

It is a shareholder-friendly exercise that’s seen as an indication of underlying enterprise power, and is actually mentioned in nice element at Board of Administrators conferences.

Corporations will typically make it very clear when their dividends are introduced by way of a press launch on their Investor Relations web site.

File Date Versus Ex-Dividend Date

The report date and the ex-dividend date decide which shareholders are eligible to obtain firm dividends.

If shares commerce fingers within the time main as much as a dividend fee, these two dates decide whether or not it’s the purchaser or the vendor who receives the dividend.

The report date is the date on which firm administration appears to be like at their shareholder data to see who’s eligible to obtain the corporate’s future dividend fee.

Nevertheless, this date is of little significance to buyers. Shopping for the corporate’s inventory on the report date doesn’t imply that you’ll obtain the corporate’s subsequent dividend.

Virtually talking, a very powerful date for dividend buyers to concentrate on is the ex-dividend date. This date, which is the buying and selling day earlier than the report date, has a lot better implications for portfolio administration.

Traders who buy shares on or after the ex-dividend date won’t be paid that quarter’s dividend (though they are going to be entitled to future dividends, assuming they nonetheless maintain the shares).

Traders who buy shares earlier than the ex-dividend date will probably be paid that quarter’s dividend.

Observe: This investor.gov web page particulars the report date versus ex-dividend date.

The rationale why the ex-dividend date is the buying and selling day sooner than the report date is as a result of it takes a day for a commerce to ‘settle’ – for money and shares to legally commerce fingers.

This appears counterintuitive–anybody who has positioned trades earlier than is aware of that money is deposited to your account on the day that you just promote shares.

Usually, that is just because your dealer is keen to entrance you the cash upfront whereas they wait to obtain cash from the counter-party. The precise course of takes a day to finish.

This is the reason you should buy upfront of the report date to obtain the dividend fee in query.

The Cost Date

The fee date is the date on which company money is definitely paid to shareholder as a dividend. Relying on the medium via which you personal your shares, dividends could also be mailed to you as a test, wired into your checking account, or deposited into your brokerage account as money.

Many firms additionally supply a Dividend ReInvestment Plan (or a DRIP, for brief). These plans permit buyers to make use of dividends to buy extra firm shares.

You possibly can view the 15 finest DRIP shares right here (every of the shares in that article cost no charges for his or her DRIPs).

Two Actual-Life Examples of the Dividend Cost Course of

Suppose an investor is trying to provoke a place in high-quality dividend progress inventory AbbVie Inc. (ABBV), which is a member of the Dividend Aristocrats.

You possibly can obtain an Excel spreadsheet with the total checklist of all Dividend Aristocrats (with further monetary metrics resembling price-to-earnings ratios and dividend yields) by clicking the hyperlink under:

The Dividend Payment Procedure Explained

An investor buying the inventory as we speak would possible wish to be certain that she or he is eligible for the corporate’s subsequent quarterly dividend fee. As such, buyers must buy earlier than the corporate’s ex-dividend date.

The simplest approach to discover this date is by wanting immediately on the corporate’s Investor Relations web page, which may be simply discovered by way of a Google search.

Traders can see AbbVie’s dividend historical past within the Inventory Data portion of its Investor Relations web page.

There, buyers will discover that AbbVie has declared two dividend payouts of $1.64 per share thus far this yr, after paying out $6.20 per share in 2024.

One other instance is client staples large Procter & Gamble (PG), which has an excellent longer dividend historical past than AbbVie.

PG has paid dividends for 135 years, and has elevated its dividend annually for the previous 69 years in a row. PG is a Dividend Aristocrat, and a Dividend King as properly.

PG has declared two dividends thus far in 2025.

Closing Ideas

As buyers, there are numerous different extra vital points that we needs to be involved with, as an alternative of merely the timing {that a} particular firm makes use of to pay its dividends.

On an organization’s ex-dividend date, shares typically drop by an quantity roughly equal to the corporate’s subsequent dividend fee.

Traders eager to ‘lock in’ the acquire of that dividend, however who don’t buy earlier than the ex-dividend date can nonetheless buy shares on the ex-dividend date at a reduction roughly equal to the dividend quantity.

Due to this, there isn’t a benefit to ready to buy shares.

As an alternative, concentrate on creating a long-term systematic investing plan that will probably be profitable no matter your timing of dividend funds.

Moreover, be certain that an organization’s dividend is sustainable for the long term. This requires an organization to have sturdy aggressive benefits, a steadily worthwhile enterprise mannequin even throughout recessions, and a optimistic progress outlook.

For those who discover a firm that ranks favorably in line with a confirmed system such because the Certain Evaluation Analysis Database, purchase some shares and concentrate on holding the inventory over the long-term.