Knowledge
Dividend
A dividend is a portion of a company's profit that is paid to shareholders. Its amount and the date of payment are resolved by the Shareholders' General Meeting.
When should you buy shares to acquire the right to dividends?
A shareholder who holds bearer shares in his or her account two business days before the day on which the right to dividends is determined is entitled to dividends. On the day before the day on which the right to dividend is determined, the shares are quoted at a price reduced by the value of the dividend paid. Such an operation is called a dividend cutoff. The dividend payment date is separately determined by the General Meeting of Shareholders and is not the same as the record date.
The whole operation can be represented on the example of the fictional company XYZ. The date of determination of the right to the dividend was set for Wednesday, February 17, and the date of payment of the dividend for March 30. The gross dividend amount per share is PLN 10. The closing price on Monday was PLN 100.
- Monday, 15.02 — the last day on which shares of XYZ can be purchased in order to be entitled to a dividend (the shares must be held in the account after the end of the session); it is also the day on which the “dividend rights are cut off”
- Tuesday, 16.02 — on this day it is already possible to sell shares of company XYZ and at the same time retain the right to receive dividends; the reference rate is the closing price of 15.02 minus PLN 10, i.e. PLN 90
- Wednesday, 17.02 — the day of determination of the right to dividend
- Wednesday 30.30 — payment of dividends to brokerage accounts