How Dividends Are Paid: Ex-Dividend, Record and Payment Dates

When a company pays a dividend, it follows a set timeline with four important dates. Knowing them tells you when you need to own the stock to receive the payment and when the cash will actually arrive.

The four dividend dates

1. Declaration date: the board announces the dividend amount and the other dates.
2. Ex-dividend date: the key date for investors. You must buy the stock before this date to receive the dividend. If you buy on or after the ex-date, the seller gets it.
3. Record date: the company checks its records to see who the shareholders are. In the US, with trades now settling one business day after the trade, the ex-dividend date and record date are usually the same day.
4. Payment date: the dividend is deposited into your brokerage account, often a few weeks after the record date.

What happens to the share price

On the ex-dividend date, the share price usually drops by roughly the dividend amount at the open, because new buyers will no longer receive it. That's why buying a stock just before the ex-date to "capture" the dividend doesn't create free money: you get the dividend, but the shares are worth about that much less, and the dividend may be taxable. See capital gains tax on stocks.

How often dividends are paid

Most US companies pay quarterly. Some pay monthly, especially certain REITs and funds; others pay twice a year or annually, which is common for international companies. Companies can also pay one-off special dividends.

Cash or reinvest?

You can take dividends as cash or have your broker automatically reinvest them into more shares through a dividend reinvestment plan (DRIP), often including fractional shares. Reinvesting lets your income compound over time. See how much difference it makes with the dividend calculator.

Keep an eye on sustainability

A dividend is never guaranteed. Companies can cut or suspend payments when profits fall. Check the payout ratio and free cash flow to judge whether a dividend is safe, and read dividend investing for beginners to build an income portfolio. You can find dividend payers with the stock screener.

This article is educational and not investment advice.