Enough of the jargon – what do I need to know about dividend dates?

The language of trading and investment is littered with examples of esoteric terms and confusing acronyms. This is also true for dividend investors and it is essential to understand the signifance of the various dates effecting your dividend entitlements. It may mean the difference between being eligible for the next dividend and missing out. This article will clear the jargon to clearly outline the meaning and purpose of basic dividend date terms.

The important dates that effect dividend entitlements and payments are the:

  • ex-dividend date;
  • the record date; and
  • the date payable or payment date.

Record Date

When a company declares a dividend, generally at the same time as its biannual trading results announcement, it also announces a record date (sometimes also known as the books closing date). Dividends are paid to all investors listed on the company’s share register at 5:00pm on this record date. Changes to registration details also need to be made by this time.

Ex-Dividend Date

The date on or after which a stock trades ex-dividend. At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.

The ex-dividend date is determined by the ASX by working forward from record date. The ex-dividend date is 4 trading days prior to the record date. Therefore the investor MUST have purchased the shares at least five trading days before the record date or by the close of trading on the day BEFORE the ex-dividend date.

The moment the trade is executed the investor becomes the legal owner of the share. However, it is not until three business days later that the funds are transferred and the stock is transferred from seller to buyer on the share register. Fortunately, share investors do not have to determine the ex-dividend date from the books close date as the ASX automatically does this and ex-dividend dates are readily available in the financial press and the ASX website.

Payable Date

Most Australian companies pay dividends between two and eight weeks after the ex-dividend date. This varies and some companies are noteworthy for being consistently slow It is worth checking the payable date as some companies are serial offenders when it come to late payment of dividends. The company posts out the dividend cheques on the payable date Alternatively, if you have requested a direct credit, the day the funds will be transferred to you. Investors who participate in a dividend reinvestment plan (DRP) will receive shares in lieu of cash around this date.

Cum-Dividend vs Ex-Dividend

You will note that in the financial press that shares are often annotated CD and XD. If you buy a stock before the ex-dividend date, the stock is cum-dividend, and you’re entitled to the dividend. The share is considered to be cum-dividend. If you buy it on or after the ex-dividend date, then you will not receive the current dividend as the stock is considered ex-dividend.

Never forget, that in order to receive the dividend you must purchase the shares before the ex-dividend date.

The information provided on this website is for use of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific professional or investment advice. The team at Dividends.com.au are not lawyers, financial planners, investment advisers, or accountants. So, before taking any action or risking any money, you should always check with your own qualified professional advisers.