A dividend is a share of profit
The board proposes a dividend and shareholders usually approve it at the annual meeting. It can be cash or extra shares, and it is never guaranteed.
Stock Market Basics · Lesson 5 of 10
Dividends
How shareholders are paid, how to read yield and payout, and what to check.
6 minutes · 9 questionsLesson 5 · Card 1 of 4
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A dividend is a share of profit
The board proposes a dividend and shareholders usually approve it at the annual meeting. It can be cash or extra shares, and it is never guaranteed.
Four dates
The declaration date is when it is announced. The record date is when you must be on the share register. The ex-dividend date is the cut-off: buy on or after it and you miss this dividend. The payment date is when the money arrives.
Yield and payout
Dividend yield is the dividend per share divided by the share price. Payout ratio is total dividends divided by profit. A very high yield can simply mean the price has fallen.
Check before you rely on it
Look at profit, the payout ratio over several years, the company's stated policy and any capital rules. Banks in particular may have to keep more capital and pay out less.