Question

How to record a purchase of a passive equity security in the 2nd quarter that pays dividends in quarter 4?

Answer 1

There are five major dates in the process of a company paying dividends. These are:
1. Dividend declaration date,
2. Last Cum-dividend date
3. Ex-date,
4. Date of record or record date and
5. Date of Dividend payment.

The first one, declaration date is the day on which the company announces to shareholders and to the market that the company will pay a dividend. The company communicates this decision to shareholders through notices to the stock exchanges and to the public and market participants through newspaper advertisements

What happens if you actually buy on the ex-date?
Whenever a company announces a book closure or a record date, the exchange sets up a ‘No Delivery’ period for that security.During this period, trading is permitted in the security, but these trades are settled only after the no-delivery period is over.Therefore, although you may have bought shares before the record date, you will not be a shareholder on the records, as the shares would have still not been delivered to your account.Therefore, the buyer of the shares on or after the ex-date will not be eligible for the benefits. However, if you sell shares on the ex-date, you will still be eligible for dividends.The last one, the date of payment is the date the company sends out the dividend to the entitled shareholders.