You must Sign In to post a response.
  • Category: Stock Market

    What is the meaning of Ex-dividend date?


    Want to invest in the share market? Learn in details about the relation between the ex-dividend date and the share market prices.

    In share market, company gives dividend to its share holders. They mention the dividend amount with ex-dividend date. I want to know,

    1. What is ex-dividend date?
    2. How dividend amount is decided?
    3. Why share price fall or change during ex-dividend date?
    4. Which share holders are eligible to get dividend? For example, Will I get dividend if dividend announcement date is 11 March and I bought share of that company on 23 march and ex dividend date is 24 march. What is the condition for getting dividend? What if I exit the share on 23 march itself. Will I be paid dividend?
  • #142089
    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.

  • #142104
    A company making profit announces a dividend to its shareholders time to time. At the time of announcing dividend, an ex-dividend record date is also informed.

    As shares of a company are regularly sold and bought, their ownership changes. The dividend is to be paid to the owner and here the ex-dividend record date comes to the rescue. The dividend is paid to the person who owned the shares on the ex-dividend record date.

    Knowledge is power.

  • #142138
    Ex dividend date is decided by the company before the date of declaring the dividend. Generally it will be 2 days before the date of dividend declaration. The dividend will be paid only to the seller if the shares are sold on or after ex dividend date.

    After completion of the financial year all the companies has to make their balance sheet. It should be audited by the statutory auditors and to be certified. Profit after tax will be known from the balance sheet. Once balance sheet is ready the company, Board of Directors will conduct a meeting. Basing the performance of the comp[any this year, the last record and the company expansion plans, they will propose a dividend percentage. This dividend is to be ratified by company Annual General Body meeting. Then the company will announce the dividend and pay the amount to the share holders.
    The seller will be getting the dividend even though he sells the shares after the Ex dividend date. Hence buyers will buy only if they are compensated for this. Hence there will be small decrease of share price.
    Each company will have a record of share holders. They are only eligible to get dividend.

    drrao
    always confident


  • Sign In to post your comments