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Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders. There are two ways to distribute cash to shareholders: share repurchases or dividends.Many corporations retain a portion of their earnings and pay the remainder as a dividend.

Many investors are getting confused about the ex-dividend date and record date.To get the dividend there are particular date specified in which investor must hold the share in their Demat or pool account.To clarify many investors doubt  the following details are given by one example:

As per NSE notice, for PATNI computers, 30.8.2010 is ex-dividend date and 31.8.2010 is the  record date for the purpose of dividend which was Rs.63 per share.

Ex-dividend date: 

In the above case of Patni, the ex-dividend date is 30.8.2010.
The ex-dividend date was created to allow all pending transactions to be completed before the record date. If an investor does not own the stock before the ex-dividend date by payment, he or she will be ineligible for the dividend payout.Within record date, the shares should be credited to investors account. In india, T+2 system is carried out. In Patni case, if any one purchased share on 27.08.10(friday), he will get the shares transferred in his name on 31.08.10(Tuesday  Trading day Friday,Plus two days Monday and Tuesday).

Note: Saturday and Sunday are non-trading days and hence T=2 days system will apply only to working days.

So he will not be eligible for dividend if any one purchases Patni Computers on 30.08.2010, it will be ex-dividend as the shares will be credited only on 1.9.2010 as per T+2 concept. So 30.8.2010 is ex-dividend date.

Please refer the below link for the dividend history:

Note:In above link Effective Date should be considered Ex Dividend Date.
(As a simple note if you buy shares on Ex Dividend date you will not get Dividend)

The Ex-Dividend Date is the first day a stock trades without the dividend declared attached to it. If investor buy a stock on the Ex-Dividend Date buyer is not qualified for the dividend. Therefore, if any buyer is very interested in receiving dividends,he must own the stock prior to the Ex-dividend date.This also means he can sell a stock on the Ex-Dividend date and still receive the dividends even though shares have not been placed in his account yet.

The record date:

In the above case of Patni Computers Record Date is 31.8.2010.

The record date is the date on which investor must be a holder of the stock (i.e., a share holders or unit holders) in order to receive the dividends for the upcoming payment date.

1 comment:

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