When a company declares its earned profits in its quarterly results, it may give a share of its earnings to the shareholders. The share is proportional to the number of shares owned by the individual. This is known as a dividend. A company pays a dividend to make stocks appealing to investors and to retain them.
So, when are stock dividends paid out?
Below are a few important dates to note:
1. Declaration Date: It is the date when the company declares the dividend. It includes dividend amount, ex-dividend date and payment date.
2. Record Date: It is the date by which the company must record an investor. Only shareholders on the record are entitled to a dividend payment. To be eligible to be added in the company’s book, it is essential to buy stocks at least two days before the record date.
3. Ex-Date: This is usually before the record date. If you purchase shares on or after the ex-date, you are not eligible to get the dividends. It’s up to Indian stock exchanges to determine the ex-date.
4. Payment Date: This is usually a month from the record date. The declared stock dividends are paid out on the Payment Date.
How is dividend payout calculated?
The dividend payout is the ratio of annual dividend per share with the net income of the company. For instance, if the dividend is 10 per share and you have 100 shares, you will receive a dividend of 1000. The dividend payout is received in 2 business days.
How is a dividend paid out?
The dividend can be paid out monthly, quarterly, semi-annually, or annually. Sometimes, there is no set schedule for payouts, and if the company is making exceptional profits, it can also give out special one-time dividends. The payout can be in the form of cash or additional stocks. The dividends can be used to repurchase shares in the open market. The dividend cheque is usually credited to your bank account.