Dividends are a cash or share reward given to shareholders on a quarterly or annual basis.
There are four important dates investors must know when it comes to dividends. They are, the announcement date, the ex-dividend date, the record date, and the payment date.
- The announcement date is the date a company announces its dividends.
- Shareholders must purchase stock by the ex-dividend date to be eligible for a company's next dividend.
- The record date is the date that a company must decide which shareholders are eligible for dividends.
- The payment date is the date when shareholders will receive the dividend payout
Dividends are most commonly paid on either an annual or quarterly basis. Yet, this does not hold true for funds that pay out dividends. Funds pay dividends as each company disperses dividends. As a result, funds tend pay dividends more frequently.
Investors seek companies that pay dividends to generate extra income for themselves.
Companies that pay a larger dividend could be a sign that they are no longer innovating or growing. Because of this, companies reward existing shareholders and incentivize new investors by paying larger dividends.