Dividends are a taxable payment declared by a company's board of directors and given to shareholders out of the company's current or retained earnings. Dividends can take the form of a stock dividend or other property, but are usually given as a cash dividend.
Investors need to look at two important dates in order to determine whether they should receive dividends: the "record date" and the "ex-dividend date" or "ex-date." The record date is the date when you must be on the company's books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.
Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally two business days before the record date. If you purchase a stock on or after the ex-dividend date, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. If you sell your stock before the ex-dividend date, you also are selling away your right to the stock dividend.
- Ex-Dividend Dates. Securities and Exchange Commission.