What is a dividend and how do the key dates work?

A dividend is a share of a company's profits paid out to its shareholders, usually in cash and usually on a regular schedule. Mature, cash-generative companies — think Apple, Microsoft, JPMorgan, Coca-Cola or India's IT and FMCG majors — return part of their earnings to owners rather than reinvesting every rupee or dollar back into the business. The amount is set by the board of directors and is typically quoted as an amount per share (for example $0.27 per share) or, on a trailing basis, as a dividend yield: the annual payout divided by the share price.

Four dates govern every dividend, and confusing them is a common and costly mistake. The declaration date is when the board announces the dividend. The ex-dividend date (or ex-date) is the single most important one for traders: to receive the payout you must own the shares before the ex-date. Buy on or after the ex-date and the seller, not you, collects this dividend. The record date is when the company checks its books to confirm who the registered shareholders are — in most modern markets it falls on the same day as, or just after, the ex-date. Finally, the payment date is when the cash actually lands in shareholders' accounts, often a few weeks later.

Because a company is literally paying cash out of its balance sheet, a stock's price typically drops by roughly the dividend amount on the ex-date, all else being equal. This is not a loss — the value simply shifts from share price into the cash you are about to receive. This mechanic is why chasing a dividend by buying just before the ex-date and selling just after rarely produces a free lunch.

Dividends matter to different investors for different reasons. Income investors and retirees prize a steady, growing payout as a cash stream they can live on. Long-term investors value reinvested dividends, which compound powerfully over decades and historically account for a large share of total equity returns. And the market often reads a dividend increase as a signal of management's confidence, while a cut is treated as a serious warning about the health of the business.

In India, dividends are declared by the board (subject to shareholder approval for the final dividend) and are taxed in the hands of the investor at their applicable slab rate, with tax deducted at source above a threshold. In the US, qualified dividends receive preferential tax treatment. The upcoming ex-dividend dates below track large, reliable payers so you can see at a glance which companies go ex-dividend in the coming weeks.