Question

Briefly discuss each of the chronological "steps" in the process of paying a dividend

Answer 1

Basically chronological steps in the process of paying dividends describes the timeline for a series of events which take place after a company decides to pay dividends to its shareholders. The following steps are included in that process:

1). Declaration Date

The day when a company issues a statement declaring that it intents to pay a dividend. On the same date, the company also announces the holder-of-record date and the payment date.

2). Ex-Dividend Day

It is the first business day on which a share will trade without its dividend. As a result, investors who owned shares before and on the ex-dividend date will receive a dividend once it is paid, while investors who acquire shares on or after the ex-dividend date will not have the benefit of receiving the dividend.

3). Holder-of-Record Date

It is simply the record date, when a shareholder that is listed in the company’s records is deemed to have ownership of the company’s shares for the purpose of deciding who can and who cannot receive a dividend when paid. It is typically one or two business days after the ex-date.

4). Payment Date

It is the date on which a company transfers the dividend payments to its shareholders. It doesn't need to be a business day. It can also occur on a weekend or holiday.