What is a Declaration Date?
In the income investing world, a declaration date is the date on which a company announces an upcoming dividend payment, usually by issuing a press release a few weeks before the dividend is actually paid.
How Does a Declaration Date Work?
Let's assume you own 100 shares of Company XYZ. At the end of the quarter (say, March 30), Company XYZ calculates its financial performance. The board of directors then reviews this information, including Company XYZ’s profit margin, and declares via an April 30 press release a $0.10 per share for the quarter, payable on May 15 to shareholders of record as of May 1. In this case, the declaration date is April 30.
Why Does a Declaration Date Matter?
Thedeclaration date is one of several important dates to when a company's declares a . The others include:
- : This is the date on which a company reviews its books to determine its "shareholders of record." Shareholders who hold a particular on this date receive the firm's payment.
- record date has been determined, the stock exchanges or the National Association of Securities Dealers (NASD) assign the ex-dividend date. The ex-dividend date for is typically two business days prior to the record date. If an investor buys a stock before the ex-dividend date, then he or she receive the payment. If an investor purchases the stock on or after the ex-dividend date, then he or she is not entitled to receive the . On the ex-dividend date, a company’s share price usually declines to reflect the amount of the paid. For example, if a stock is trading at $100 and pays a quarterly of $3 per share, then, all other things being equal, the stock open on the ex-dividend date at $97. : After the
Many things influence the timing and size of. -paying companies typically declare dividends on a regular (usually quarterly), but in general a is not required to pay dividends, nor is it required to pay a of the same size, even if it has done so in the past. Even if a company declares a , some of the company’s shareholders may not be eligible for it: Companies with more than one class of stock often set forth preferences among those classes.
Further, corporations do not always have to declare . Occasionally, a company declare an after a particularly good or if it is going out of business -- in which case the is essentially a distribution of the proceeds of .dividends -- in some cases they may declare