Upcoming dividends

What are Dividends?

Dividends are a portion of company profits distributed among investors as a form of income or reward in return for their capital. This dividend is paid from a company's net earnings after all the necessary expenses are deducted and payments to preferred shareholders and debenture holders are made. It is mostly paid as cash; however, companies often pay them as additional shares to investors.

Publicly listed companies are not necessarily required to pay dividends to shareholders. It is at the discretion of the company’s BOD whether they will declare dividends in a year or not. In most cases, dividends are declared quarterly in a year, i.e. 4 times in a fiscal year.

• Dividends are a form of income that shareholders receive from listed companies. 
• They are paid from the company’s surplus profits to equity shareholders in cash or in the form of additional shares.

What are Upcoming Dividend Stocks?

Upcoming Dividend Stocks refer to those shares that have declared their dividend, which is due for payment in the next few days. Underlying companies of upcoming dividend stocks declare dividends in their Annual General Meeting (AGM) and pay them in the forthcoming period.

How Do Upcoming Dividends Impact Share Prices?

The impact of upcoming dividends on share prices can be distributed into 2 phases. The first phase starts after the dividend declaration and continues till the ex-dividend date. During this period, the share prices increase because more and more investors buy the upcoming dividend stock. Eventually, the increased demand leads to an increase in prices. This price increase can also be attributed to a positive market sentiment that occurs after a company declares a dividend.

The second phase starts immediately after the ex-dividend date. This phase witnesses a decrease in stock prices because, after the ex-date upcoming dividend, stocks trade without the benefits of dividends, leading to a price decrease. This is a normal market correction of prices that is necessary to maintain efficiency and transparency in the markets.

• First phase - Upcoming dividend stocks experience a price increase in this phase due to increased demand for shares.
• Second phase - In this phase, the upcoming dividend stock price plunges because these stocks are trading without the benefit of dividends.

What are Important Upcoming Dividend Dates?

Here are key dates related to the upcoming dividend stocks:

1. Declaration Date - The declaration date is the date on which the board of directors (BOD) of a company approves and declares the dividend amount that will be distributed among shareholders. The ex-dividend date is also stated on this date.
2. Ex-Dividend Date - The ex-dividend date is important because it symbolises the deadline after which the shares of a company trade without the benefit of a dividend. It means shareholders who purchase shares after the ex-date are not eligible to receive the declared dividend.
3. Record Date - On this date, the company of an upcoming dividend stock finalises the details of all the shareholders eligible to receive the declared dividend.
4. Payment Date - The payment date represents the final stage in the dividend payment process. On this date, the dividends are distributed to shareholders. In the case of interim dividends, dividends must be paid within 30 days of the announcement, whereas if it is an annual dividend, it must be paid within 30 days of the Annual General Meeting (AGM).

Key Takeaways On Upcoming Dividend

• Dividend refers to the reward given to shareholders as a portion of the company's net profit. Dividends are paid quarterly or annually in a financial year.
• Upcoming dividend stocks refer to those listed companies that have declared their dividends and are due for payment in the upcoming period.
• The dividend distribution process is primarily dividend across 4 dates: Announcement, ex-dividend, record and payment date.
• Upcoming dividends impact share prices in a phased manner. In the first phase, prices of upcoming dividend stocks increase; in the second phase, the prices decrease.