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Question

Difficulty: EasySettlement Dates, Trade Confirmations, and Corporate Actions

Arrange the four key corporate dividend milestone dates in chronological order from earliest to latest occurrence.

  1. 1Declaration Date: The Board of Directors officially announces and approves the dividend payout.
  2. 2Ex-Dividend Date: The date on which the stock begins trading without the right to receive the declared dividend.
  3. 3Record Date: The date on which an investor must be officially listed on the corporate books to receive the dividend.
  4. 4Payable Date: The date on which dividend checks or electronic funds are disbursed to eligible shareholders.

Answer

The correct chronological sequence for corporate dividend dates is Declaration Date, Ex-Dividend Date, Record Date, and Payable Date (commonly remembered by the memory aid DERP).
The chronological sequence for corporate dividend distribution follows the DERP acronym: Declaration Date (board announcement), Ex-Dividend Date (first day stock trades without dividend), Record Date (compiling list of registered owners), and Payable Date (distribution of payment).

Step-by-Step Solution

1
Identify the initial announcement date.
Declaration Date is first.
The dividend process begins when the board of directors officially declares the distribution.
2
Determine when the stock trades without dividend entitlement.
Ex-Dividend Date occurs next.
Trading rules dictate the ex-date based on settlement cycles so secondary market buyers know if they will receive the payout.
3
Identify the official ownership recording date.
Record Date follows the ex-dividend date.
The issuer compiles its final roster of shareholders entitled to payment on this date.
4
Identify the final distribution date.
Payable Date occurs last.
Dividend funds are paid out to shareholders of record on the payable date.

Key Concept

DERP Dividend Sequence (Declaration, Ex-Dividend, Record, Payable)
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions