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Dividend Definitions & Terms

 
Dividend:

A Dividend is a distribution of a portion of a company's earnings to shareholders in the form of cash or stock.  Typically, a Dividend is paid out in cash quarterly by the company.

 

Dividend Yield: The Dividend Yield is the annual dividend payout expressed as a percentage.  Specifically, the Yield is equal to total annual dividends per share divided by the current stock price.

 

Declaration Date: The Declaration Date is the day on which the company announces to the public that it will pay a dividend. (see example)

 

Ex-Dividend Date: The Ex-Dividend Date is the first day in which the company's stock trades without the right to receive the declared dividend.  In order to receive the declared dividend one must purchase prior to the Ex-Dividend Date and hold the stock at least until the day the stock goes Ex-Dividend. (see example)

 

Payable/Payment Date: The Payable Date is the day on which the company executes the payment of the dividend by either mail or credit to holders of record brokerage account. (see example)

 

Payout Ratio: The Payout Ratio is a measurement used to determine how much of a company's earnings are being paid out in dividends to shareholders.  Specifically, the Ratio is equal to dividend per share divided by earnings per share.  "Normal" Payout Ratios vary greatly by industry, but lower ratios are typically safer.  Ratios above 100% are theoretically impossible to maintain, as this means the company is paying a dividend larger than their current earnings.

 

Record Date: The Record Date or Date of Record is the day on which the company looks at records to determines the shareholders entitled to receive the dividend payout. (see example)