Dividend payment procedure

Company makes dividend decision with considering number factors. Now, how does the company distribute such dividends? Dividend payment includes a systematic process and every company follows it. The process includes different dates and such are declaration date, holder of record date, ex-dividend date and payment date.

Declaration date

Managers manage the company. However, the crucial decisions are made by the representative of the shareholders and those are called board of directors. Board of Directors controls the firm. Board of Directors meet and with help of the management, declares dividend what the company is going to distribute. For example, Board of Directors of Everest bank limited met on November 1 and declared to pay 20% cash dividend from December 10, those who record their name until December 15.

Holder of record date

It is a date until which a person, who has bought shares before ex-dividend date, must register his/her name in the company. Holder of record date is a final date to transfer the title, meaning that the seller’s name should be replaced by the buyer’s name in the company’s register till this date. In the above example, December 15 is a record date. Any investor who buys shares before December 11 must record his name in the company until 15 to receive dividend.

Ex-dividend date

It is the date on and after which the right to the current dividend no longer goes to the stock. The ex-dividend date varies country to country and may also determine by the companies themselves. In the Nepalese capital market companies published notice of nook closer date and the book closer date is the ex-dividend date. This date normally is the four days before the holder of record date. In the above example, December 11 is the ex-dividend date and those who purchase shares on and after this date will not receive dividend and receive by the seller of the shares.

Payment Date

It is the date on which company starts to pa dividend.