Declaration Date

A declaration date is the day a company's board of directors publicly announces that it will pay a dividend, and spells out the details of that payment. A dividend is a cash payment (or sometimes stock) a company distributes to its shareholders, usually out of profits.

On the declaration date, the announcement typically includes three things: how much will be paid per share, the record date (the cutoff day you must own the stock by, in order to qualify for the payment), and the payment date (the day the money actually shows up in shareholders' accounts). The declaration date itself is not when you get paid or when eligibility is decided — it is just the announcement.

The nuance beginners trip over is confusing the declaration date with the ex-dividend date. The ex-dividend date is the date set by the exchange or clearing system, usually shortly before the record date, on which a stock starts trading without the value of the upcoming dividend attached. Buy the stock on or after the ex-dividend date and you will not receive that particular dividend, even though the declaration happened earlier. The declaration date is simply the starting gun; the ex-dividend date is the one that actually matters for who gets paid.

Companies don't have to declare dividends on a fixed schedule, but many large, stable companies declare them quarterly, so the declaration date becomes a recurring, semi-predictable event that traders watch for.