Payment Date

Categories: Credit

See: Dividend. See: Declared Date.

The Pay Date, or Payment Date, is the day a dividend actually pays.

Like...you own 1,000 shares of Duke Energy. They pay fifty cents a share in dividends 4 times a year. You owned your shares past April 15, which was that quarter's "minimum date" that you needed to own those shares to be eligible for the dividend. It was declared. You were owed the dough. Now you just had to wait 3 weeks until that dough is actually paid into your account.

This whole notion of so many delays in payment on dividends came from the very low-tech and slow world of a century ago. Back then, for many, the only gains investors made on investments comprised dividends. Stocks often really didn't go up. So the dividends mattered, and when you owned the stock mattered. Things weren't registered and tracked electronically, so some poor scrivener had to receive proper legal notice of you having bought your shares ahead of that key date so that you were eligible for the divvy. Then there was a paper check he wrote. And an envelope he put it in. And then postal workers, oft angry, who had to deliver it to you n weeks later.

With electronic deposit and automatic connections between most brokers and most public companies, the process is today lightning fast and relatively easy for all. But the relics of time delays stil lexist in the process, so we...deal.

Related or Semi-related Video

Finance: What are Dividends: Declaration...15 Views

00:00

Finance a la shmoop what are dividends? that is declaration date ex-dividend

00:07

date pay date and record date yeah so you thought you could just invest in the [Money transfers to market for stock]

00:12

stock pay 20 bucks a share and get to know 30 cents a share in dividends four

00:16

times a year right? That was all you needed to know oh yeah not so easy well maybe

00:21

it is easy but things are never so simple on the street the mean street you

00:26

know the Wall Street when you buy a share of stock that pays a dividend a

00:30

whole bunch of technical questions get asked and they basically all revolve [Question marks revolving around a stock]

00:34

around whether or not you are entitled to that thirty cents and if you think

00:39

about it dividends have been around for a long long time a whole bunch of

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schemers out there trying to kind of ripoff that dividend in nefarious ways [Person tears off dividend from stock]

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all right well why does it matter whether you're entitled to that thirty

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cents or not well with all those nefarious people out there wouldn't you

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think there are a whole bunch of sharpies they're trying to legally take [Man reading book of laws and loopholes]

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advantage of the system like you know buying that $20 a share stock the day

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before the dividend is payable holding the stock until that investor is owed

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the dividend and then just selling the stock like five minutes later it's like

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an ATM courtesy of equity stock dividend right good buy it and you sell it a [Person uses a equity stock dividends ATM]

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couple days later make free profit move on well the markets are smarter than we

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are and they adjust to that very quickly So anyway the laws have to

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be crystal clear as they apply to that process or innocent people kind of get [Man locked away in a cell]

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taken and each of the terms are on the technicals behind who gets what when in

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the land of dividends matters a lot all right first up declaration date okay

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that's the date when the board of directors publicly announces that they

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will in fact pay a dividend along with the details relating to that dividend

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like how big it will be the day you'll have to own the stock to be entitled to

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receive that dividend and also the date that the dividend will actually be paid

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all right so that's that next up the ex-dividend date and yes it [Laws appear]

02:00

sounds like something Charles Xavier and Magneto would argue about but in fact [Charles Xavier and Magneto appear]

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it's not although that'd be a cool superhero to be like a ex-dividend

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opposed to an x-men maybe that's like a Wall Street superhero

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our lawyers are glaring at us right now the ex-dividend date is the last date

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after which shares bought in a given company don't automatically have that

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periods dividend attached so think about it like it's a Macy's white flower day [Macy's advert appears on TV screen]

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sale discount on the share you're buying if you don't buy it by say

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close of market Tuesday or whenever it is well then you don't get it that's the

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ex-dividend date you don't get that freebie dividend discount when you buy

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the share if you buy it after the close like at 4:01 p.m. on Tuesday you had to

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buy it before the market closed on that Tuesday or whenever the ex-dividend date [Man stood next to clock]

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was got it all right so all the other dates before this are called cum

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dividend or with dividend such that anyone owning this stock at that period

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has legal right to receive the dividend all right it is natural then for a $40

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stock paying say a 50 cent dividend to naturally drop 50 cents the day after

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the ex-dividend date comes into effect and in reality more or less this is what

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happens albeit with many twists and turns in the market that is the stock

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goes from 40 bucks to 39.50 a share you know the next minute so the key

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delimiter date is the record date shareholders have to register their

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ownership and yes your brokerage does that automatically usually of a given

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share of stock on or before the date of record to get that dividend and

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eventually when the dividend is finally paid magically that date is called the [Magicians stick taps stock and disappears in smoke]

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pay date yeah shocker so yeah that's a lot of dates to keep track of kind of

03:47

reminds us of ourselves when we were in our 20s in college and had a social life

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not anymore [Group of girls sitting together]

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