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What is a Dividend?
What is a Dividend?
Updated over a week ago

A dividend is a portion of a company’s earnings, passed down to its shareholders, by the decision of its board of directors. These payments typically come based on a payment schedule or quarterly, but some stocks make payments monthly, annually, or semi-annually. Eligibility of receipt of the dividend is based on various factors such as record date, and ex-dividend date.

Record Date: This date is set by the company’s board of directors and is the date in which the company reviews the list of shareholders whom are eligible to receive the dividend. Recent purchases must be settled by the record date to be eligible to receive the dividend payment.

For Example: The record date is 1/6. An investor would need to purchase by 1/4 to be eligible to receive the dividend.

Ex-Dividend Date: This term literally means without dividend. This date represents the cut-off date for the dividend payment and is generally the business day before the record date. This date is set based on the rules of the exchange for which the stock trades. Shareholders who sell their shares prior to the ex-date are typically not entitled to receive the dividend.

For Example: A dividend with a record date of 5/15 and an ex-date of 5/12. A shareholder can sell the stock on 5/12 and receive the dividend, however, would not be entitled to the dividend when selling the stock on 5/11.

The SEC T+2 settlement rule calls for stock transactions to settle (or be completed) no more than two days after a transaction takes place. That's why purchases made the day before the ex-date, which then settle on the record date, make the buyer the owner of the record for purposes of dividend payment. This is also the reason why sellers prior to the ex-date are no longer the owner of the shares and are therefore ineligible to receive the dividend.

If you have any questions regarding the receipt of a dividend, please reach out to our member support team via chat or email at

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