A dividend is a cut of the company’s profits paid out to the shareholders. To be eligible for a dividend, you must be an existing shareholder, or you must purchase the stock during or prior to the cum-dividend trading period and hold the stock on the ex-dividend date.
Cum-dividend duration is when a company is about to declare the dividend.
How is dividend issued?
On a rough way, a company issue dividends by the following process:
1. Declaration date:
Declaration date is when the Board of Directors declares a cut from the overall earnings in a form of dividend. A company will issue this information many days before ex-dividend date, so interested shareholders have everything corrected.
2. Cum-dividend date (trade time):
The last day that the buyer of a stock is entitled to the dividend. You’ll only be eligible to receive dividend if you’ve held the stocks here. Make sure you have all the holdings clear before the ex-dividend date, in case of weekends invest early, so holdings get clear.
3. Ex-dividend date:
The first day that the seller of a stock is entitled to the dividend. The ex-dividend date for stocks is usually set one business day before the record date. If you buy a stock on its ex-dividend date or after, you will not be entitled to receive the next dividend payment. Thus, if you are willing to receive dividend invest early or don’t.
4. Record date:
The company prepares a sorted list of all the individuals believed to be dividend eligible stockholders of the company. If you need some correction in bank details, get it cleared before the record date. You can update it on your trading dashboard settings.
5. Payment date:
The exact date of dividend payouts; usually ~30 days of record date.
This is how dividends are issued you can receive it on time by applying on the time.
Do all stocks pay dividends?
Some companies choose to pay dividends on quarterly or yearly basis; while some don’t pay at all. If you are thinking why is so, then try to understand the exact reasons.
Usually companies those offer dividend would be a brand and well established as they generate enough earnings to share part of if among the shareholders. While companies which are small in scale will reinvest their earnings to increase their business, so they are unable to offer anything for shareholders.
If you wish to purchase shares just to receive the dividend and then sell them again, you need to purchase the stock during the cum-dividend trading period, and you may then sell them any time on or after the ex-dividend date. If you purchase the stock on the ex-dividend date, you will not be entitled to the dividend payment.