What Is an Unpaid Dividend?
Let me explain what an unpaid dividend is directly to you. It's a dividend that's due to shareholders but hasn't been distributed yet. This happens because of the timing gap between the record date—when you're officially eligible as a shareholder—and the payment date, when the money actually gets sent out.
Key Takeaways
You should know that unpaid dividends exist due to the difference between when a company announces a dividend and when it's paid. During this period, the company records these unpaid amounts on its books, but they get cleared once payments are made. As an investor, pay attention to the key dates in the dividend process to avoid confusion about whether you'll receive the payment.
How Unpaid Dividends Work
To get this straight, let's review the four main dates in the dividend-payment process. First, there's the declaration date, when the board announces the upcoming dividend. Then comes the ex-dividend date, after which new buyers won't qualify for that dividend.
Next is the record date, usually two days after the ex-dividend date, where you must be on the company's books to be eligible. Finally, the payment date is when the dividend is actually distributed, often about a week after the record date. Between declaration and payment, those dividends sit as unpaid on the books, and once paid, that entry is zeroed out.
Example of an Unpaid Dividend
Consider XYZ Corporation, trading at $30 per share, known for its steady dividends. On July 30th, they declare a $1.50 per share dividend, with the record date on August 8th and ex-dividend on August 6th. If you buy shares on or before August 5th, you're eligible. From July 30th until the payment date, XYZ has unpaid dividends recorded, which clear out once shareholders get paid.
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