Important Dates Investors Should Know Regarding Dividend Payment
Mukunda Tripathee
Investors should give keen consideration toward the dates before buying or selling the securities. He/she should sell the securities after the date of record so as as to save his/her earning of holding period. If the investor sells the securities before the date of record he loses his dividend of holding period and same the dividend is entitled to the new investor within very short time. So, intelligent investor should always be aware about the dates for dividend payment before selling the securities. As per operating guidelines and dividend decision there are different dates: declaration date, date of records, ex-dividend date and Payment date.
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Declaration date
From the profit of the company, Board of Directors announces that a specific amount of dividend to the shareholders whose names are on the company records with in or before the specific future date. The date on which meeting of BOD is held and declare the dividend for the investors from the profit of the company of last fiscal year is called declaration date.
Date of record
At the time of dividend declaration, meeting of BOD also specifies a date of record. For example, if the board of directors meets on November 20, 2020 and announces dividend to the stockholders of the record on November 28, 2020, 20th November is date of declaration and 28th November is called date of record. Date of record is most important to investors to be entitled for the dividend. Whose name is in the record of stockholders registers on or before the date of records i.e. 28th November are entitled to receive dividend. The new investors would receive dividend if their name is in record of company’s stockholders register on or before record date, otherwise, the old stockholders would receive the dividend.
Ex-dividend date
To transfer the ownership of share from seller to buyer a normal duration is taken. After the complete of the transaction, only name of stockholders would be recorded in stockholders’ register of company. Normally, buyer and seller require two business days to complete the transaction. So, the shares traded on 26th November would not generally be recorded in stockholders register. To entitle the dividend into new investors name transaction must take place before 26th November. Therefore, the date when the right of dividend leaves by existing stockholders to new stockholders is called ex-dividend date.
Payment date
Nepalese practice is different from international practice for dividend payment date. In our practice, a company declares dividend to the stockholders from the profit of the company and date of record. The company notifies dividend payment date to the stockholders later. The investors who purchases securities before the book close date is entitled to get dividend. After the dividend announcement, the BOD also specifies the date on which the payment of dividend is actually made. This is called the date of dividend.
(Mr. Mukunda Tripathee is currently working in the banking sector)
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