Question

List and explain the main important dates of the dividend payment process.

Answer 1

The main important dates in the dividend payment process are the following ;

1. Dividend declaration date : On this date the Board of Directors approves and declares the payment of dividend. The Board of Directors specify the amount of dividend, and also informs the record date and the payment date. The Liability of the dividend is created with this declaration.

2. The record date : The record date is the date on which an investor must be enrolled as common shareholder in company's record to be eligible for receiving the dividend. This is determined by the Board of Directors.

3. The ex-Dividend date : It is the date from which the stock trades in the exchange on ex-dividend basis. Any investor purchasing the stock from this date will not be eligible for the dividend. The ex-dividend date is generally 3-4 days earlier than record date and is fixed by the stock exchange where the stock is listed. The ex-dividend date is earlier than the record date as the transactions in stock market takes a few days to get completed.

4. The dividend payment date is the actual date on which the dividend is actually paid to the shareholders . On this date the cash payment is recorded and dividend liability is settled by cash entry in accounting.