What Do The Different Dividend Dates Mean? Declaration, Record, Exdividend and Payment Dates

When it comes to investing for dividends, it is important to familiarise yourself with all the different dates in a companies dividend timetable. The dates are important as it determines who
qualifies for a dividend payment and when those payments will reach your bank account. The four key dates any investor needs to be familiar with are the declaration date, the record date, the ex-dividend date and the payment date.

Dividend Declaration Date

This is the date the company you are invested in announces the details of the dividend. By going to the investor relation section of the companies website on this date, you will be able to see information on the size of the dividend, the date of record and the payment date. One a company declares a dividend, it is legally bound to pay that dividend to its shareholders.

Dividend Record Date

This is the date that is used to determine who is on the share register and therefore entitled to the dividend. The company sets the date of record after it has announced that it will pay a dividend. For you to receive a the dividend you need to be a shareholder on the company’s books on this date.

Ex- Dividend Date

To ensure you are a shareholder by the record date – and receive the dividend that has been declared – you need to buy shares at least one day before the ex-dividend date. The reasons for this is due to the standard settlement for UK equities being two working days.

For example, Company XYZ sets a record date of Friday 7 July. The ex-dividend date in this case would be Thursday 6 July. If you bought shares on Wednesday 5 July the trade would settle two days later on 7 May so you would be on the share register on the record date and would qualify for the dividend.

If on the other hand you bought shares on Thursday 6 July this would the shares would only settle on Monday 10 July. In this instance you would not be on the share register as at the record date and therefore would not qualify
for the dividend.

Dividend Payment Date

This is the date dividends will be paid to your account. There is no hard and fast rule on the length of time between the record date and the payment date but the London Stock Exchange says companies should aim to pay dividends within 30 business days of the record date. Companies will usually reveal details of the payment date on their website and in shareholder announcements.

Why Share Prices Fall on the Ex-Dividend Date

A common question I get in my inbox is to do with why share prices fall on the ex-dividend date. The answer is simple, it is because the value of the forthcoming dividend is included in the share price up until the ex-dividend date. At the ex-dividend date, the seller of the stock is the one entitled to receive the dividend so they will usually be willing to sell their shares at a lower price once they have factored in the amount of dividends they will receive.

For example, Company A has a share price of 100p and has announced a dividend of
6p. When the market opens for trading on the ex-dividend date, the share price will have been adjusted down to 94p – the fall in value of 6p is the amount the current holder of shares would be entitled to receive in the form of dividends.