Originally Posted by Lneal
So declared dividends are not paid?That helps to know.
I'm sure if you look in your textbook, there will be a more detailed explanation of the process.
In a rinky-dink (no offense intended) small business, the owner can declare a dividend or payout and cut the check the same day.
Doesn't work that way in real life in a Fortune 100 corporation (or any publicly traded company).
For instance:
the board declares the dividend on 12/20/11
for shareholders of record on 12/31/11
payable on 01/07/12
The Ex-Dividend date would 12/29/11.
This means if you buy the stock after this date, you won't get the dividend.
If you sell after this date, say on 12/30/11, but before the date of record, you'd still get the dividend.
The ExDiv date is always 2(?) days prior to the record date.
(btw, there are many, many funds and investors that play this game. Yeah, the tax rate is higher if they're buying and selling without holding the stock for such a short time, but sometimes it's worth it.)
Dividend checks will be mailed on 1/7/12.
The corp. needs time after the date of record to make sure all accounts are settled so it knows who owns how many shares of its stock that will eligible for a dividend payment.
Effect on cash flow for 2011 - zip.