Dividend Payment Dates
With an understanding of dividend types, you need to know the four dates that control who gets paid and when. The ex-dividend date is one of the most frequently tested concepts on the SIE exam.
The Four Key Dates
Every dividend follows a four-date sequence:
| Date | What Happens | Set By |
|---|---|---|
| Declaration date | Board of directors announces the dividend amount, record date, and payment date | Company |
| Ex-dividend date | First day the stock trades without the dividend attached | Exchange/FINRA |
| Record date | Shareholders on the company's books as of this date receive the dividend | Company |
| Payable date | The dividend is actually paid to eligible shareholders | Company |
Memory Aid: Think D-E-R-P: Declaration, Ex-date, Record, Payable.
Exam Tip: Gotchas
- The ex-date is set by the exchange/FINRA, NOT the company. The company sets the declaration, record, and payable dates, but the exchange determines the ex-dividend date.
The Ex-Dividend Date
The ex-dividend date is the most important date for the exam. Under the current T+1 settlement cycle (effective May 28, 2024):
- The ex-dividend date is 1 business day before the record date
The golden rule:
- Buy before the ex-date → you ARE entitled to the dividend
- Buy on or after the ex-date → you are NOT entitled to the dividend
Think of it this way: When you buy a stock, the trade does not settle instantly. Under T+1 settlement, the trade settles one business day after the trade date. If you buy on the ex-date, your trade will not settle until after the record date, so you will not be on the company's books in time to receive the dividend.
Price Behavior on the Ex-Date
On the ex-dividend date, the stock price typically drops by approximately the dividend amount.
- This makes sense: the stock no longer carries the right to the upcoming dividend
- A stock trading at $50 with a $1 dividend would typically open around $49 on the ex-date
- The drop is automatic for exchange-listed securities; the exchange adjusts the opening price
Exam Tip: Gotchas
- The ex-date price drop is not a loss. The stock price drops by approximately the dividend amount because the stock no longer carries the right to the upcoming payment. This is a market adjustment, not a decline in the company's value.
Putting It All Together
Example timeline:
| Date | Event |
|---|---|
| January 15 | Declaration date - Board announces $0.50/share dividend |
| February 12 | Ex-dividend date - Stock trades without the dividend starting today |
| February 13 | Record date - Must be on the books by this date |
| March 1 | Payable date - Dividend checks are mailed/deposited |
- If you buy the stock on February 11 (before the ex-date), you get the dividend
- If you buy the stock on February 12 (the ex-date), you do NOT get the dividend
Exam Tip: Gotchas
- Buy on the ex-date = no dividend. If you buy on the ex-date, settlement occurs after the record date, so you miss the dividend. Buy BEFORE the ex-date to get the dividend.