“A dividend is a payment made to shareholders, based on the company’s profits. When a corporation goes into earnings surplus, the board of directors will then decide whether to reinvest it back to the business, or pay a dividend in cash or as shares of stock to its shareholders.
Public corporations tend to pay on a fixed schedule, but have an option of declaring a special dividend at any time. Companies usually tend to pay dividends when they don’t significantly benefit from re-investing their profits. High tech startups usually don’t pay dividends, since they need to reinvest to help sustain growth.
Dividend payments can sometimes act as a signal of a company’s well being. Reductions or liquidations after a steady flow of payments can indicate that something is wrong.
However, companies are not obliged to pay dividends, and it’s not always a sign of performance. For example, Google is a very successful company, with vast profits, but doesn’t pay dividends to its shareholders.
There are 4 important dividend payment days to know:
Declaration date is the date when the Board of Directors declares the information concerning the dividend payment, including the size and the payment date. Once stated, the company is legally obliged to pay dividends to its shareholders.
This date is set by the stock exchange or National Association of Securities Dealers (NASD). Investors who purchase stock on or after this date are not entitled for dividend payments. However, the investors who sold stocks on that day will get the payment.
This is the date when the company looks through its data to record the shareholders eligible for dividend payments and the company’s financial information.
The date when dividends are paid to shareholders, who purchased the stock before the ex-dividend date.
Payment details will differ for each company. You will need to do some research in order to be aware of this. GetStocks makes it easier for investor to stay aware of the dividend payments by sending you an email notification. ”