Understanding Share Dividends

“For many investors a key criteria in selecting a share, is whether a company pays dividends and the size of those dividends.

So what are dividends?

As a shareholder you are entitled to a share in the company’s profits or earnings. Companies pay dividends from their net earnings and are usually expressed in cents per share.

There is no requirement for the company to pay a dividend from earnings, some companies might choose to reinvest the earnings back into the business.

Share Dividend Company Shareholder Example

Companies which do pay dividends tend to follow a regular policy of paying dividends to shareholders. The amount of dividends is usually a percentage of the earnings and is called the dividend payout ratio. This usually remains stable over time.”

Source: ASX

Important Dividend Dates

There are 2 important dates relating to dividends; the record date and the ex-date.

Record Date

“The record date is 5pm on the date specified by the company as the date when they will identify the persons on the company’s register entitled to the dividend (in other words the shareholders of the company at that time).”

Source: ASX

Ex-Dividend Date (Ex-date)

“Four business days before the company's Record Date. To be entitled to a dividend a shareholder must have purchased shares before the ex dividend date.”

Source: ASX

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