June 16, 2024

Five dates are important when it pertains to dividend declarations and payments


It is often confusing when companies announce large dividends. You will see hype around a certain dividend and think "I can buy the share and get the dividend". Be careful of this thinking. The markets are forward-looking. The share price that you pay, will include the dividend amount. Subsequently, on ex-dividend date the share price will drop by the dividend amount.


1. Declaration Date/Cum-dividend date

As the English word suggests, this is the day the dividend is declared and announced to the market. Finance scholars will often use the Latin word cum-dividend. Cum means "including". So, if you buy the share on cum-dividend day or after, you pay for the dividend. A companys valuation includes the cash because cash is an asset. When this asset leaves the business, the valuation of the business will drop and resultantly the share price will drop too. So do not attempt to Buy the Dividend.


2. Last Day to Trade/Register (LDT/LDR)

The name gives it away again. This is the last day to trade in the shares to qualify for the dividend. If you own the share at 5pm on LDT date, you will qualify for the dividend. You must own it at market close.


3. Ex-dividend Date

This is the first day the share starts trading excluding the dividend. The share price will drop by the dividend amount per share at market open on ex-dividend date. This is always the very next business day after LDT. Do not be shocked when you see the share price drop on this. The dividends were allocated to the qualifying shareholders the previous day, so the share price will drop the dividend amount from the share price.


4. Record date

Investors are not affected by this date. This is the date that the company is required to update its records of which shareholders qualify, as per 5pm on LDT. It is for the company, not the investors.


5. Payment Date

This is the day when the dividend is paid and the company issues dividend payments. The 20% dividend withholding tax will already be deducted from the amount in your investment account.


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