Stock Dividends: Definition In Stocks And How Payments Work

Is the Company giving out dividends? Why it's important to know when investing in dividend stocks?

A wonderful feature of many stocks is the reward of dividends to shareholders. Not all stocks trading on the Philippine Stock Exchange pay dividends to their shareholders, but many large blue-chip companies do pay dividends.

Dividend payments can be an attractive form of stock market investing. The payments can be made annually, quarterly, or even monthly, and they come in the form of cash payments. Dividends can be a way to replace income, or they can be a way to use the income to purchase more shares of stock. Here are some definitions to consider that you should remember:

Cum Dividend

​Means "with dividend." A stock trades cum-dividend up until the ex-dividend date. On or after this point, the stock trades without dividend rights.

Declaration Date

The date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.

Ex-Dividend Date (also known as Ex-Date)

The date set by the Exchange starts from which the buyer is no longer entitled to dividends.

Record Date

The date on which the company looks at its record to see who the shareholders of the company are who will be entitled to the dividend.

Payment Date

The date the company mails out the dividend to the holders of record. This date is generally a week or more after the Record Date so that the company has sufficient time to ensure that it accurately pays all those who are entitled.

Issuer/Paying Company

A company whose board of directors decides to pay a dividend to the company's stockholders of record and announces the dividend declaration.

Transfer Agent

Transfer Agent is any person who performs on behalf of an issuer or by itself as issuer any of the following activities:

• Countersigns, when applicable, certificates of securities upon their issuance.
• Monitors the issuance of securities to prevent unauthorized issuances.
• Registers the transfer of such securities.
• Exhanges or converts such securities.
• Records the ownership of securities by bookkeeping entry without physical issuance of securities certificates.