What is a dividend?
A dividend is a sum of money paid regularly by a company to its shareholders out of its profits or reserves.
Dividends are given based on each shareholder’s stake in the company, offering them a certain sum of money per each share they own. For example, if Apple announces a dividend of $0.80 per share, a stockholder with 50 shares will receive a $40 dividend.
There are four important dates in the dividend distribution process:
- Declaration date: When a company’s board of directors announces their intention to pay a dividend. The board also announces the size of the dividend, the ex-dividend date and the payment date.
- Ex-dividend date: When the stock starts trading without the value of its next dividend payment. Only the owners of the shares before the ex-dividend date will receive the dividend.
- Record date: When the company checks its records to see who is eligible to receive the dividend. The record date is one business day after the ex-dividend date.
- Payment date: When the dividend will actually be given to the shareholders of the company.
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