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Ex-Div Date, Dividend Dates and Types

This is sort of the cut-off in determining to whom the dividends will be paid out to. The ex-div date is usually 3 trading days before the record date.

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Dividends provide stock investors other income streams, aside from of course capital appreciation via increased stock prices. This is also the company’s way to share its income and spare cash to its investors. Dividends and the important dates that come along with it, also come into play with the short term stock prices. Here are some dividend basics that you need to know.

Cash Dividend. The most common dividend declared by companies is cash dividend. The amount of cash you get ties in the amount of stocks you are holding. Say you a holding 100 shares of a company, and the company declares P1 cash dividend per stock, then you get P100 cash diviends (subject to income tax). Another way to check whether the cash dividend is substantial is by dividing cash dividend over the stock price. If the stock price is P5 and cash dividend is P1, then that’s 20% returns for you. If the company declares cash dividends twice a year, then 20% return in 6 months is not bad at all.

Stock Dividend. From the name itself, instead of cash, stock dividends means you get additional shares for every share that you already have. For example, a 10% stock dividend means that for every 100 shares, you get 10 additional shares. The plus side of this is that the dividends you get has its own earning potential, unlike cash where you already lock-in gains. The down-side will be, the dividends may go lower in prices together with the share price and that you get them in odd lots. Also, you need to note where the stock dividends are coming from. Is the company enlisting additional shares (hence diluting market caps, bringing share price down) or whether company is letting go of its own shares to give to other shareholders. Not entirely sure whether the last scenario is allowable, but the first scenario is more common. More common and not really healthy to share price in the short-run.

A few months back, PSE declared a whopping 100% stock dividend. At first, this sounds like PSE will double the stocks that you are holding, for free! But note that it comes with a price. At the ex-date (cut-off), share price dropped by half (from ~P500 to ~P250 levels) since there are now twice as many outstanding shares out there, than yesterday.

Recently, a company also declared stock dividends of another company that they owned. PX (Philex Mining) declared stock dividens of PXP (Philex Petroleum) that was soon to have an IPO. The stock dividend entered PSE at P1.20 and skyrocketed to P12 on its IPO first day. Now, it’s down to P6-7 levels.

Another thing that stock investors should note is the frequency and amount of dividends. A regular cash dividend is definitely a plus, especially when the cash dividend is increasing. But a regular stock dividend is a different story.

What are the dates to take note of for dividends?

Declaration date is the date the company declares dividends to its shareholders. This date usually coincides the annual meeting or a regular board of directors meeting. The declaration may be seen in PSE’s corporate disclosures link. In the declaration, there are other dates that need to be noted.

Record date: All shareholders holding the stock as of record date are entitled to dividends. If your name is on the list as of record date, then you get the dividends.

Ex-Div date: This is sort of the cut-off in determining to whom the dividends will be paid out to. The ex-div date is usually 3 trading days before the record date. The 3 trading days considers the 4-day clearing time, to update the record books on who’s holding the stock and who’s not. If you own the stock a day before the ex-date, then you will get the dividend since 4 days after (clearing days), your name will be on the record books. But if you buy the stock on (or after) the ex-div date, then your name will not make it to the record books since 4 days after will be a trading day already after the record date. Similarly, if you sell your shares on ex-date, you will still get your dividends since you will appear on the record books on record date (but will be not there the trading day after). Illustration below helps:

Div Ex Date

As such, it happens at times that there is a sell-off on stocks on the day of their ex-dates. This means that people just bought the stocks for the dividends, but they don’t have plans to keep the shares after.

Payable date: This is the date that the dividends are actually paid out by the company. This date has no connection to the previous dates, but is more tied as to when the company is willing and capable to pay out the cash or the dividends. Note that this is the date that the company pays out the dividends, but the date that you receive it will be T+4, or 4 days after, again due to some sort of clearing.

Keep close tabs of your dates if you don’t want to miss those dividends!

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About Geri (359 Articles)
Founder and main author. Husband, used-to-be-breadwinner, God-made multi-millionaire, employee, financial planner and adviser, investor, stocks trader, entrepreneur, agri-preneur, book author. Firm believer that all Pinoys deserve a richer life. Not a guru, but a forever student of the investments world, a work-in-progress.

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