Must Know Details Of Dividend For Every Investor

  Author: Kundan Kishore

If you own shares of a company and it makes profits, often it will share a slice with you as dividends.  Most of stocks investors know this much. But there are some other aspects of dividends which you must also know. This is especially useful when a company announces dividends.

When and what of dividends Most investors are confused as to when dividend gets paid and on what date shares trade without dividend. According to the law, dividends are paid to the holders of shares as of the record date set by the company while announcing dividend amount. However, if you buy on the record date you won’t get the dividend as there is a lag of two days between purchase and when the shares get credited to you.

To ease matters, exchanges notify an ex-date, the date when shares will trade free of any dividend. Thus, one should buy or hold at least two days before the notified record date or day before ex-date if one wishes to receive dividend. After the record date, the dividend is paid usually within thirty days.

Interim and final dividend Investors should also know about the distinction between interim and final dividend. An interim dividend can be paid prior to the approval of the shareholders. A final dividend, on the other hand, must first be approved by the shareholders, before it is paid. Thus, there is considerable time lag between dividend announcement and record date in final dividend.

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