Dividends are cash payments that a company will pay to is shareholders as a reward for buying the shares. They are paid out of the company’s earnings because they help companies attract investors. The benefit for investors is that they provide regular income which can be withdrawn as cash or go towards buying more shares for a portfolio.

Dividend Payment Date

The payment date (or pay date, or payable date) is the day on which the dividend is scheduled to be paid to eligible investors. This date can be up to a month after the ex-dividend date – that is, the day that investors have to be recorded as owning shares in order to receive the dividend.

The payment is made to the broker through which the investor bought the shares, rather than to the shareholder directly, and it is added to the investor’s brokerage account.

Frequency of Dividend Payments

Scheduled dividend payments are usually made quarterly, although some companies may have different schedules such as every month. In addition, sometimes special dividend payments are made as a one-off, if the company has recently made a large asset sale or there has been some other event that results in a large nonrecurring profit. The special dividend is used to return extra money to shareholders.

Relevant Dates for Dividend Payments

Dividends are paid to all shareholders who were recorded as owners of the stock before the ex-dividend date.

The board of directors of a company will announce when the next dividend payment is to be issued, and will set the ex-dividend date, which is usually up to a month earlier. This gives potential investors a deadline for when they need to buy shares in order to qualify for the dividend.

Here are the four major dates in the dividend payment process:

FAQs

1. How often are dividends paid?

Companies usually pay dividends every quarter, although some many have different schedules. Companies can also pay special dividends if they have extra cash to return to shareholders.

2. How are dividends paid?

Companies will pay the dividend to all shareholders who own shares on the day of record. The payment will be made to the broker, and it will be deposited into the investor’s brokerage account.

3. Why is the ex-dividend date important?

Investors who want to buy shares in order to receive a dividend which has been announced have to do so before the deadline: they have until the day before the ex-dividend date to make the purchase. If they miss the deadline they won’t appear on the company’s records as shareholders in time to get the upcoming dividend.

4. Does the stock price change when a dividend is paid?

GET STARTED

Free and unlimited demo account
Over 2,800 CFD instruments are available for trading on the Plus500 CFD platform
Min Deposit: $100

Disclosure: 80% of retail CFD accounts lose money. Plus500 does not offer spread betting, social trading, or bonds. Furthermore, hedging is strictly prohibited on the Plus500 CFD platform.

Yes, it is likely that the stock price declines when a dividend is paid because the value of a company decreases as the dividend payments are drawn from profits and reserves. However, other factors can come into play to offset that decrease, if there is a higher market demand for the stock.