Dividend is declared as a percentage on the paid up face value of shares. A date is declared as record date. All shareholders whose name is on the record of the company as shareholder will get the dividend.
1. What is ex-dividend date?
The trading on shares will be continuing even after dividend is declared. However it takes a couple of days for the trade to complete and the new buyer to get the shares in his name. So there will be confusions as to who will get the dividend when a share is sold after dividend is declared. For this an Ex- dividend date is reckoned. If a share is sold on or after this ex-dividend date, the dividend declared already will be given to the seller only and not the buyer. Usually ex-dividend date is two days prior to record date.
2. How dividend amount is decided?
After getting the profit figure on conclusion o accounts of the financial year, the company director board decide to earmark a certain sum as dividend to the shareholders. This then is worked and decided as a percentage of the share paid up face value. For example if company decides to pay 25 per cent dividend to its share holders and if the paid up face value of each share is rupees 10, then each shareholder will get Rs 2.50 as dividend for each share he holds. The company follows the relevant statutes also in this regard.
3. Why share price fall or change during ex-dividend date?
Buyer of shares traded on or after Ex-dividend date is not eligible to get the dividend. Hence the share price will fail down from the share value prevailing just before the ex-dividend date. Buyers who traded the shares before the ex-dividend date will get the dividend and hence they will be ready to pay more price for the share.
4. Which share holders are eligible to get dividend?
All share holders whose name is recorded in the company books as shareholders as on record date, and who have paid the value called by the company for those shares, are eligible to receive the dividend. Buyer will get dividend only on shares traded before the ex-dividend date. Only those whose names are in the company books on record date are eligible for dividend.